Well-positioned
for future success
Annual Report and Consolidated Financial Statements 2024
Focused
growth
We are a large-scale variety discount retailer operating across Europe.
We are committed to offering our shoppers – and especially families on a budget
– everything they need to replenish and enhance their home across key apparel,
general merchandise and FMCG categories.
Introduction
Other information
79 Remuneration report
84 Deviation from the Dutch
1
Highlights
140 Independent auditor’s report
Corporate Governance Code
2
At a glance
146 Articles of Association provisions
and Warsaw Code
governing the distribution of profit
86 Directors’ report
Strategic report
147 List of branches
148 Statutory list of all subsidiaries
4
Non-Executive Chair's statement
Financial statements
and affiliated companies
6
CEO's statement
89 Consolidated income statement
150 Glossary of terms
8
Q&A with our Chief Executive Officer
90 Consolidated statement of other
152 Shareholder information
10 Business model
comprehensive income
12 Our strategy
91 Consolidated statement of
18 Market review
financial position
20 Key performance indicators
92 Consolidated statement of
22 Financial review
changes in equity
34 Sustainability
93 Consolidated statement of
52 Risk management
cash flows
54 Principal risks and uncertainties
94 Notes to the consolidated financial
59 Going concern
statements
129 Separate income statement
Governance
130 Separate statement of
financial position
60 Introduction to governance
131 Separate statement of changes
62 Board of Directors
in equity
65 Corporate governance statement
132 Separate statement of cash flows
70 Audit Committee report
133 Notes to the separate
74 Nomination Committee report
financial statements
76 Remuneration Committee report
For more on Pepco Group, visit
our website: www.pepcogroup.eu
Highlights
Revenue
Like-for-like sales
Net new stores1
€6,167m -3.2%
392
FY24
6,167
FY24
-3.2
FY24
392
FY23
5,596
FY23
6.0
FY23
648
Gross margin
Underlying (IFRS16) EBITDA2
Underlying (pre-IFRS16) EBITDA3
43.9% €944m €515m
FY24
43.9
FY24
944
FY24
515
FY23
40.0
FY23
754
FY23
402
Underlying profit after tax4
Reported (loss) / profit after tax5
Underlying earnings/share6
€179m -€662m 31.1c
FY24
179
FY24
(662)
FY24
31.1
FY23 108
FY23
157
FY23
27.2
Free cash flow7
Net debt (pre-IFRS16)8
ROIC9
€168m €256m 22%
FY24
168
FY24
256
FY24
22
FY23
(106)
FY23
411
FY23
17
New ESG goals
We are launching our new 2030 ESG Strategy
Planet
People
Product
Carbon emission
Employee engagement
Packaging and waste
Diversity
reduction
Responsibly sourced
materials
Ethical sourcing
Further information on our new 2030 ESG strategy can be found on page 34
1
Net new stores is an Alternative Performance Measure (APM), defined as the
6
Underlying EPS is defined as basic earnings per share based on underlying profit
number of stores opened during the period less stores closed during the period.
after tax from continuing operations. A reconciliation to reported EPS is shown in
2
Underlying (IFRS16) EBITDA is an APM, defined as profit on ordinary activities
note 30.
before depreciation, amortisation, rent, net finance costs and taxation.
7
Free cash flow is an APM, defined as operating cash flow on a pre-IFRS 16 basis
A reconciliation of underlying EBITDA to statutory measures is presented on note
less non-underlying items and capex. See note 27 for further details.
27 in the financial statements.
8
Net debt (pre-IFRS16) is an APM, defined as the Group’s pre-IFRS 16, long-term
3
Underlying (pre-IFRS16) EBITDA is an APM, defined as profit on ordinary activities
borrowings, net of cash and bank balances as at 30 September 2024.
before depreciation, amortisation, net finance costs and taxation. A
9
ROIC is an APM, defined as NOPAT/IC, where IC (invested capital) = PP&E +
reconciliation of underlying EBITDA to statutory measures is presented on note 27
intangibles (excl. goodwill) + NWC (current assets – current liabilities excluding
in the financial statements.
IFRS 16 lease liabilities) and NOPAT = net underlying operating profit after tax.
4
Underlying profit after tax is an APM, defined as profit on ordinary activities after
10 Pepco Austria is classified as a discontinued operation following the Group’s exit
tax adjusted for non-underlying items. A reconciliation of underlying PAT to
of Austria. All numbers above (including comparators) exclude Pepco Austria.
statutory measures is presented on note 30 in the financial statements.
R See note 27 for definitions and reconciliations of APMs
5
The reported loss in FY24 is significantly impacted by impairments recognised in
the year as shown in the consolidated income statement.
1
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
At a glance
A leader in
discount retailing
We are a leading pan-European variety discount retailer, operating a network of 4,948
stores across 20 countries under the Pepco, Poundland and Dealz brands, proudly
serving over 61 million shoppers each month.
Our locations
Revenue
By Region
38
60
78
88
1,339
758
331
UK&I
32%
63
307
Poland
26%
153
Rest of CEE
32%
256
475
Rest of WE
10%
130
39
145
35
199
167
By Brand
16
234
37
Pepco
62%
Pepco
Poundland
Dealz
Poundland
33%
* Dealz and Pepco stores in Ireland are reported under the Poundland segment
Dealz
5%
Stores
Customers (per month)
Employees
Operating countries
4,948 61.1m 47,760 20
2
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Our businesses
Pepco
Poundland
Dealz
PGS
Pepco operates over 3,700
Poundland has a network of
Dealz operates 331 locations
PGS provides direct
stores in 18 countries, and is
over 830 stores in the UK
in towns and cities across
product sourcing, product
widely recognised as one of
and the Republic of Ireland
Poland. Dealz offers over
development and technical
CEE’s strongest retail brands.
(where it operates under
3,000 FMCG products in
services to our Pepco,
Pepco serves millions of
the Dealz format).
18 categories at the
Poundland and Dealz
customers a month, offering
Poundland offers customers
lowest prices.
brands. PGS is a real point
clothing for the whole family,
amazing value through a
of difference as we bring
and household goods at the
range of branded quality
value to customers using
lowest prices.
everyday essentials.
our vertically integrated
supply operation.
Our strategic objectives
Delivering stronger
Optimising and
Driving cost
Enhancing the
cash generation
expanding our
and operational
customer offer
through disciplined
store network
efficiency
investment
R Read about our Strategy on pages 12 to 19
Why invest?
Number of stores
Unique proposition
A unique differentiated clothing and general merchandise (GM) offering supported by exclusive
in-house sourcing office, PGS, that enhances supply chain efficiencies and accelerates speed
to market.
Growing discount market
Well-positioned in the growing discount retail sector, the Group is focused on achieving profitable
growth, strengthening its price leadership position, and continually enhancing its value proposition
for price-conscious consumers.
Pepco
3,781
Strong brand equity
Poundland
836
Well-established brands with a strong market share in core markets, underpinned by a loyal
and growing customer base that values affordability, quality, and convenience.
Dealz
331
Robust financials
With a strong balance sheet, the Group is adopting a highly disciplined approach to capital
expenditure, positioning itself for healthy free cash flow generation. Profitability is a core focus,
supported by expanding gross margins.
3
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Non-Executive Chair’s statement
Focus on
measured growth
Resetting the business
My mission at the start of the 2024 financial year was to go back
to the Group’s roots of what made our business a success in the
first place. I am proud of the progress we have made over the
last 12 months. We have delivered record revenues and EBITDA
across the Group, with a strong recovery in gross margin of over
300 basis points.
Pepco had fallen into a trap of seeking growth for growth’s sake,
opening an ever-increasing number of new stores without a clear
portfolio strategy, and expanding into areas that were non-core
to the business. On assuming the role of Executive Chair in
September 2023, I re-focused the business around "doing less,
to achieve more" – a phrase that I have continued to remind my
team of over the last year. I am particularly pleased of the
turnaround in Pepco store profitability in its core Central and
Eastern Europe (CEE) markets, which is now delivering profit per
store ahead of pre Covid-19 levels.
We have reviewed all underperforming areas of the business,
including exiting the unprofitable Austrian market, and stopped
non-core activities. We introduced greater rigour and analysis
across all investment decisions, with a strict hurdle rate of return
for all spend. This has resulted in slowing growth in Western
Europe while we assess expected returns, and pausing our
three-category Pepco ‘Plus’ format of stores, which sold FMCG,
alongside our core categories of clothing and general
merchandise. Early on in the financial year, we also paused
Andy Bond
our new look store renewal programme that was scheduled to
Non-Executive Chair
continue across all CEE stores.
Instead, we have doubled down on the opportunity in our CEE
markets, which are those we know best and where we generate
the highest returns. New store growth will continue to be targeted
within the CEE over the next financial year, with ample white
I am proud of the progress we
space opportunity within the region to grow the business further
have made over the last
over the medium term.
twelve months, but there
Following the appointment of new Chief Executive Officer Stephan
Borchert, I reverted back to the role of Non-Executive Chairman
remains more to achieve.”
from 1 October 2024. I have always had confidence in the
underlying strength of this business. Now, with Stephan at the
helm, I believe we have the right person in place to address the
challenges we face and to continue to deliver profitable growth.
Strong financial results in the face of challenges
The Group reported record revenues in FY24 which exceeded
€6 billion for the first time, growing by 10% over the prior year. In
addition, Group EBITDA increased by 25% to €944m, driven by a
strong Pepco performance where EBITDA was up by 42% as a
result of store expansion and a strong recovery in gross margin
within Pepco. This in turn contributed to a Group-level gross
margin of 43.9%, representing a 390 basis point improvement
year-on-year.
4
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Despite the strong financial results, like-for-like (LFL) revenues were
During the period, there were a few changes to the Board. Pierre
lower than last year across all of our brands. Group LFL declined
Bouchut stepped down in his role as Independent Non-Executive
by 3.2% overall in FY24. Pepco was impacted by a combination of
Director and Audit Committee Chair at the AGM in March 2024.
supply chain disruption, affecting the consistent and timely
The Board thanks Pierre for his service and commitment to the
availability of stock, as well as working its way through excess
Company over the last three years. Frederick Arnold was
older stock from previous seasons that was gradually reduced
appointed to the Board as an independent Non-Executive Director
over the year through markdown. Trading in Poundland and
in June 2024, as Audit Committee Chair. Frederick is an
Dealz was negatively affected as the ranges transitioned to
experienced senior financial executive who has extensive
Pepco-sourced clothing and general merchandise. For
experience serving as board chair, audit committee chair and
Poundland, in particular, we misread the scale of challenge in
chair of a variety of other special committees across numerous
getting our customers to understand and embrace Pepco ranges.
public and private UK and US companies.
We also made several planning and execution mistakes which has
In addition, Sean Mahoney joined the Board as a Non-Executive
resulted in a significant decline in Poundland's profitability for
Director in March 2024, proposed by our majority shareholder.
FY24. While we expect initiatives to improve our supply chain, and
Sean is part of the Board’s Audit and Nomination Committees.
have made changes to remediate the shortcomings of Pepco-
Sean has extensive experience serving as a board director for
sourced product during the year, it is likely to take time for
large public and private companies across Europe and the US.
Poundland and Dealz customers to recognise improvements.
With his proven track record in investment banking and as a
Despite the challenging environment, the Group's financial
non-executive director, Sean’s significant experience of business
position has improved significantly during the year with a stronger
and financial strategy, capital markets and financing has made
balance sheet as we generated stronger free cash flow, which
him a strong addition to our Board.
improved by €274 million year-on-year. The Company has access
to over €500 million in liquidity (from cash and credit facilities). This
Looking forward
strong financial foundation, alongside strong brand equity and
I am increasingly optimistic about the prospects for the Group.
leading market share in our core CEE markets, with a proven
We started the year with a number of objectives which included
profitable store model, gives us confidence in the opportunity to
rebuilding profitability in our core CEE markets, gross margin
continue building Europe’s leading variety discount retailer.
recovery, adopting a more disciplined approach to investment
with more targeted growth and delivering stronger cash
Valuing our people
generation.
I was honoured to step into the role of Executive Chair, at the
We have delivered on these objectives, but there remains more
request of the Board, 12 months ago until a successor for CEO was
to achieve. Our core focus in the year ahead will be to strengthen
appointed. During this period, I have been incredibly impressed
LFL revenues, which I am confident will improve as the business
by the resilience of our team as we’ve navigated a period of
overcomes inventory and supply chain challenges. We will also
uncertainty, while resetting our short-term strategy to focus on
continue to concentrate on expanding our price leadership
measured profitable growth and cash generation. We have seen
position and enhancing the core customer proposition. With these
the fruits of this hard work in the strong financial results delivered
foundations, as well as a focus on disciplined capital expenditure
in FY24, and much of this is down to the adaptability and energy
to drive free cash generation, we expect to deliver further
with which our team has approached these challenges.
strategic progress in FY25.
I want to take the opportunity to thank all 47,760 colleagues
across our 20 operating countries, who continue to put the
customer at the heart of everything they do, every day. This result
Andy Bond
would not have been achieved had it not been for their ongoing
Non-Executive Chair
dedication to the business.
Evolving our Board and management
I am delighted that Stephan Borchert joined the Group as
Chief Executive Officer in July 2024. Stephan brings a wealth
of experience and a results-driven track record in retail and
international business operations. Stephan served from 2018 to
2022 as CEO of GrandVision, the global leader in optical retail
operating more than 7,400 stores in over 40 countries worldwide.
Prior to that, Stephan was President of Sephora EMEA on the
Global Executive Committee. I look forward to working closely
with Stephan as we deliver our renewed strategy to improve
profitability and cash generation in our core established business.
5
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
CEO’s statement
Significant
opportunity ahead
It is an honour to be writing to you as Pepco Group’s new
Chief Executive Officer.
Pepco Group has a strong reputation for delivering outstanding
value, range and convenience for our customers. The Pepco
brand itself sits uniquely amongst other discount retailers, offering
customers a breadth of items across the clothing and general
merchandise categories at affordable prices, while also
ensuring high-quality standards.
Harnessing opportunities
Since joining the business in July 2024, I have been exploring the
various pockets of opportunity that lie in front of us. Pepco is firmly
entrenched in its core Central and Eastern European (CEE)
markets, with a loyal customer base who regularly visit our stores.
We will continue to grow our strong and profitable market position
in the CEE region, while defining an expansion strategy for key
markets in Western Europe that benefit from a supportive macro
economic backdrop.
Whilst the business has faced challenges over recent years,
I have been impressed by the energy and willingness of the
team to overcome any setbacks and drive the business forward.
47,760 colleagues contribute every day to elevate the customer
experience through their commitment and passion in each of
our 4,948 stores that operate across 20 markets.
Foundation for growth
Stephan Borchert
Under Andy Bond’s leadership over the last year, the business has
Group CEO
laid solid foundations for long term success by re-focusing on
driving profitable growth through disciplined investment.
Working from this strong base, we recognise the need for further
evolution to enhance our agility as a business, setting us up to
tackle current and emerging challenges and allowing the Group
The ambition to be one
to realise its full potential.
of Europe’s leading
This will require a review of all areas of the business, as well as the
discount variety retailers
current Group structure and our operating and expansion model,
remains intact."
to determine where we can increase efficiencies and drive the
strongest returns for the Group. I look forward to updating you
on my strategic plan for the Group at our Capital Markets Day in
March 2025.
The ambition to be one of Europe’s leading discount variety
retailers remains intact. I am excited to work with my leadership
team, supported by the Board, to deliver on the Group’s
strategic priorities as Pepco Group enters the next phase of
its growth journey.
6
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Building a more sustainable and equitable future
At Pepco Group, we recognise our responsibilities for our business
practices, in order to create sustainable long-term value creation,
in a world where our various stakeholders including customers,
employees, suppliers and investors, increasingly expect
businesses to contribute positively to society and the environment.
Therefore, in FY25, we are introducing a new sustainability strategy
that marks a bold step forward in our dedication to fostering a
more sustainable and equitable future. This strategy aims to
weave social responsibility and environmental sustainability into
all aspects of our operations, including product sourcing,
operational processes, and our interactions with customers and
communities.
Our approach is guided by three core pillars: Planet, People and
Product, each of which is underpinned by specific, measurable
goals that align with global sustainability standards and
disclosure requirements. Our 2030 ESG strategy will deliver our
mission to demonstrate that price is not a barrier to sustainable
and ethically produced products – see further details on page 34.
I look forward to reporting on our momentum across these areas
going forward.
Outlook
While it remains early in the year, the Group expects to build on
the like-for-like sales momentum delivered by Pepco so far in FY25.
Focused price investment on key line items, alongside an
improvement in availability and freshness of stock, is expected to
drive volume-led growth in revenues during the year. For FY25, we
are targeting to open approximately 300 net new stores across
the Group, with new stores principally focused on the Pepco brand
and primarily in the CEE region.
Management’s priority in FY25 will be to deliver continuing
progress on like-for-like revenues, which should improve as we
overcome supply chain challenges, supported by better prices,
while we continue to enhance the core customer proposition. With
these foundations, as well as a continued focus on disciplined
capital expenditure to drive free cash generation, we expect to
deliver further strategic progress in FY25.
On behalf of the entire Group, I would like to thank all our
stakeholders for their continuous support.
Stephan Borchert
Group Chief Executive Officer
7
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Q&A with our Chief Executive Officer
Q&A
with Stephan
Borchert
Taking a more measured
approach to focus
on sustainable,
profitable growth will
remain a priority.”
8
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
What is your background and why is it
What are your three biggest priorities?
relevant to Pepco Group?
As well as immersing myself inside the business since joining,
I have also met with a variety of external stakeholders, from our
I have worked for a diverse range of retail industries for more than
largest shareholders and creditors to our key suppliers. It has
20 years, including fashion, beauty, pharmacy and healthcare
been important for me to listen to truly understand the primary
services. All of these operated on either a pan-European or
opportunities and challenges for the business.
global level with multi-format or multi-brand omni-channel
From my discussions, it is clear that one of the most important
strategies. Some of them were publicly listed on stock exchanges
priorities we need to address is improving our like-for-like sales
and I served on their Boards as an Executive Director or CEO.
momentum and further investing in an efficient operating model
In addition, I have always been driven by cultivating a strong
for future profitable growth.
relationship between the business and the customer. Only by
I will also be assessing our Group structure to better understand
keeping the customer at the heart of everything a retail business
how our three brands (Pepco, Poundland and Dealz) work
does can a company maintain its relevance, succeed in highly
competitive environments and grow market share.
together, appreciate the level of integration and determine the
optimal structure going forward.
I believe that my experience with a wide variety of global
market-leading companies stands me in good stead to apply
Thirdly, investigating our opportunity in Western Europe and its
best practice around leadership, omni-channel operations,
potential future growth profile for the Group will be another focal
point. Our Pepco business has strong roots in Central and Eastern
supply chain optimisation and store operation management to
Europe, where we need to defend and grow our market position.
Pepco Group, helping it to achieve a next level of excellence.
However, if taking a longer-term view, I believe the white space
What attracted you to the role of CEO
opportunity of Western Europe will be a substantial growth driver
for us in five years and beyond.
at Pepco Group?
When should we expect to hear your
Pepco Group sits in the attractive and growing discount retail
long-term vision for the Company?
sector with a unique and market-leading position in its core
markets. The Group operates over 4,900 stores across 20
European countries and employs over 47,000 people. This is
I have clear ideas on how to address the challenges that the
a business that has seen rapid growth over the last decade.
business has faced, as well as the catalysts needed to profitably
grow the business. I look forward to outlining my strategic vision
However, the Group has had its challenges over recent times and,
for the Group at a Capital Markets Day event, which will be held
in my view, has not yet capitalised on the enormous opportunities
in March 2025.
it has. I therefore look forward to working with my leadership team
Will there be any U-turns in
on unlocking the full benefits from the scale of this business to
drive revenues, increase returns and grow shareholder value.
strategic direction?
What are your initial impressions of
The building blocks that have been laid out by Andy Bond over
Pepco Group?
the last year have formed a good foundation for this strategic
review. It is clear that the business tried to grow too quickly
My most notable observation since joining the business is the size
previously, without steadily developing the infrastructure
of the opportunity we have. Pepco already benefits from high
alongside it in order to support an expanding retail footprint.
levels of brand recognition and market share in its core CEE
markets, but there is more we can do to build on this to create
Taking a more measured approach to focus on sustainable,
profitable growth will remain a priority, as well as maintaining
a stronger business.
control on capital spend to drive cash generation. However, I will
On numerous site visits across the Group since I joined and many
also assess the best Group structure to drive this growth, as well
conversations with people around the business, I have been
as seeking new channels of growth to complement the existing
happy to witness the pride in our workforce, who do their best
business, such as exploring the benefits of adding a digital focus,
to put the customer at the heart of everything they do. Our
as well as investing in technology and supply chain to improve
success will be driven by a crystal-clear view of what our
the decision making that takes place across all parts of the
customers want. Putting their needs at the centre of our thinking,
product cycle.
shaping our business around serving them and further easing
the shopping experience.
Stephan Borchert
Chief Executive Officer
9
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Business model
Building Europe’s leading
discount variety retailer
Pepco Group offers price leadership and a differentiated product proposition, facilitated by increasing
economies of scale through our vertically integrated sourcing model.
Our strengths
Our key retail brands
Differentiated products
We are proud of the brands we have built up within the Pepco
Group.
Leveraging our scale and sourcing strategy, we offer a diverse
range of clothing, homeware-led general merchandise (GM) and
fast-moving consumer goods (FMCG), providing our core shopper,
Pepco
a “family on a budget”, with their regular shopping needs.
Leading clothing and GM-led variety discount
Understanding customer preferences and focusing on quality is
retailer in CEE expanding into Western Europe
key to delivering customer satisfaction and growing market share.
•
Focus on price leadership with market leading entry prices
Local stores in convenient locations
•
Clothing for the whole family (with a particular strength in kids and
babywear), home décor, toys and seasonal products
We own and operate a multi-format pan-European variety discount
retail business, with more than 4,900 conveniently located stores
•
3,781 stores across 18 countries, which includes 549 stores in
located across 20 countries. By focusing on standardisation and
Western Europe.
repeatability across our operations, we aim to expand our store
•
footprint efficiently in line with our growth prospects.
Integrated with PGS, our global sourcing office dealing with a
supply network of over 375 vendors utilising around 750 factories
Infrastructure and distribution network
Poundland
We continue to invest in the development of high-quality, scalable
infrastructure, including information technology, warehouses and
Delivering amazing value in branded quality,
more efficient and resilient back office support.
everyday essentials
•
FMCG-led offering with a price architecture anchored around a
Direct sourcing operation
limited number of simple price points
PGS maximises buying scale and operating efficiencies, thereby
•
Growing product offering of clothing and GM including home,
lowering costs and improving margins. With the full product
garden, food, toys, health, beauty, pets & more
development chain for clothing and merchandise managed
•
within the Group, the vertically integrated model provides
836 stores across the UK and Ireland
flexibility in sourcing.
Dealz
Our colleagues
Fast growing discount retailer
Talent retention and development is central to the success of our
•
Dealz offers unique international FMCG and GM products at the
business, and we aim to maintain the right pipeline of skills within
lowest prices with 3,000 products across 18 categories
the Group to facilitate the long-term success of our growth strategy.
•
The best deals and brands are sourced from Poland, Europe and
We maintain a strong commitment to ethical and responsible
business conduct, honesty and integrity, both within the Group
Asia, offering thousands of branded products for the whole family
and throughout our value chain.
•
331 Dealz stores in Poland
10
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Pepco Group is a powerhouse
retail business with a strong
reputation for delivering
outstanding value, range and
convenience for our customers.”
Stephan Borchert
Chief Executive Officer
Our proposition
Creating value
Revenue growth
+10%
in FY24
Customers
61m
customer transactions per month
across 20 countries
Colleagues
3,048
colleague promotions across the
Group during FY24
Society
Supporting charitable activities
across the Group, including the
Poundland Foundation
Supply chain
€1.4bn
of shipment value in FY24
1
2
3
Governments
Significant economic contribution
Sell for less
Buy for less
Operate for less
to our operating countries through
our role as both taxpayer and tax
collector, including payroll-related
•
•
•
Price leadership
€1.4bn sourcing scale
Standardised
taxes remitted in employing >47,000
store format
•
•
colleagues across the Group
Low-risk inventory
Seasonal
•
buying model
Volume leverage
•
Simple price
on operating costs
•
architecture
Direct from suppliers
•
Discount mindset
•
•
Optimised markdown
Consolidated volume
management
11
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Our strategy
Delivering our strategy
Our core strategy to date has been outlined by the key pillars below:
Optimising and
Enhancing the
expanding our
customer offer
store network
Delivering stronger
Driving cost
cash generation
and operational
through disciplined
efficiency
investment
R This has also informed our ESG strategy, which can be found on page 34
Pepco has strengthened its store
Notwithstanding these overriding strategic pillars, the year in
review was characterised by addressing issues in the business that
profitability and customer positioning in
had arisen through undisciplined growth during the previous
the CEE region using its proven, profitable
couple of years.
and scalable model”
•
Rebuild profitability in Pepco's core CEE heartland, prior to
formulating a clear plan for profitable expansion in Western
Europe
Andy Bond
•
Ensure we addressed shortcomings in our customer offer, in
particular focusing on regaining price leadership
Non-Executive Chair
•
Address cost inflation and drive cost optimisation opportunities
from our growing scale
•
Temper the pace of store openings focusing on higher return
locations and markets, while also improving working capital
through better supplier and stock management
12
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Optimising and expanding our store network
The Group’s ambition remains to be Europe’s leading variety discount retailer. We aim to achieve this by
offering quality clothing and GM products at the best prices, with stores located close to our customers,
whether that is in high streets, retail parks or shopping malls. The convenience of our store locations,
along with maintaining price leadership is critical to providing a compelling value proposition for our
customers and to growing market share.
Poundland – Performance impacted by transition
Net new store openings
392
to Pepco-sourced clothing and GM ranges
Poundland opened 84 stores during FY24 that was a higher-than-
normal store opening programme, which largely reflects 46 Wilko
conversions. In addition, we closed 71 stores in the period, as a result of
The Group strengthened its store profitability and customer positioning
managed lease expiries as well as a number of closures related to the
in the CEE region during the period, returning to pre-Covid 19
opening of the new Wilko conversions nearby. There has been a mixed
performance. New store growth was principally focused in core existing
performance from the Wilko conversions, with some stores operating
markets, where we have a strong track record in driving returns. For
above expectations, but others requiring further investment in order to
Pepco, there was a particular focus on growing scale in our core CEE
bring the look and feel and product proposition in line with the
markets, while we continue to assess our performance in Western
Poundland offer. It has become clear, however, that larger stores are not
Europe. For Poundland in the UK, the growth of new stores was primarily
where Poundland delivers best performance, and we will be much more
driven by the conversion of Wilko stores. Dealz Poland made further
focused on any future store openings being of a size of around 700 sqm,
progress in Poland.
which is optimal for the offer.
The Group delivered 392 net new store openings during FY24. This
In FY25, there will be greater scrutiny of new Poundland store openings,
excludes the impact of exiting Austria, which resulted in the closure of 73
given the reduced profitability the business has faced during 2024. New
stores. Our store opening programme in FY24 partly reflected
stores will be opened only where we are confident of delivering an
commitments made during FY23, which resulted in a front-end-loaded
appropriate return on investment through delivery of our core offer to
store opening schedule. This was reflected by 203 net new stores in Q1,
our customers. Additional rigour will also be applied to any investment in
but reducing to 86 net new stores in Q2, and just 103 stores during the
store refits and improvements.
second half overall.
Poundland’s FY24 profit was significantly impacted by not delivering on
For FY25, by prioritising attractive returns on capital, we are targeting
the ambition of enhancing the business through replacing its traditional
approximately 300 net new stores across the Group, with new stores
clothing and GM ranges with those of Pepco. The rationale for the move
principally focused on the Pepco brand and primarily in the CEE region.
was to consolidate sourcing to a larger buy across the Pepco Group in
order to drive scale, increase efficiencies, lower prices for customers and
Pepco – Profitability rebuilt in core CEE business
raise Pepco brand awareness. However, it became clear as the year
Our Pepco CEE business remains the key engine driver for the Group,
progressed that both the planning and execution of this implementation
delivering the highest returns across the estate. Pepco’s core CEE
had shortcomings, with gaps in clothing and GM product for the UK
business generated 53% of FY24 Group’s revenues, but given the
customer, impacting revenues and profitability during the year. It further
historically strong profitability of these stores, it generated the vast
became clear that our UK customers had a different expectation of the
majority of the Group’s EBITDA.
Poundland brand proposition compared with Pepco customers which
has led to a fundamental rethink of approach going forward.
The core CEE estate had seen store profitability (4-wall EBITDA pre-IFRS
16) decline since 2019, as a result of external factors (supply chain
Pepco-sourced clothing was first introduced across the Poundland
disruption, input cost inflation, weak consumer spending, higher freight
estate from September 2023, bringing new, high-quality ranges into the
costs and adverse movements in foreign exchange), as well as internal
UK market at a lower price point. While customer reaction to the new
factors (losing focus on price leadership and unfocused growth).
Pepco clothing ranges saw positive feedback – notably around value
Reversing this trend and driving improving 4-wall EBITDA was a key
– the product offer did not fully replicate the previous breadth or depth
objective at the start of the year. This is a target that we exceeded by
of Poundland’s men’s and women’s ranges and coverage across sizes,
September 2024, driven by higher revenues, a strong recovery in gross
leading to lower LFL revenues. The improved clothing offer for children’s
margin and various other operating initiatives. We continue to see
wear, which is a core strength for Pepco, did not offset the shortfall in
further opportunity to grow store operating profit during FY25.
adult wear. There was similar disruption for Poundland’s new Pepco-
sourced GM ranges, which were introduced from March 2024. Notably
Pepco opened 331 net new stores during the year, with 232 net new
these had gaps in seasonal ranges, where Poundland has had strength
stores in CEE and 99 net new stores in Western Europe. About 70% of net
historically, and had a weaker range offer in other categories of
new store openings were across our core CEE markets during the period.
historical Poundland strength, for example in DIY.
We saw 83 new net store openings in Poland in the period, with 1,339
stores in total at the period end. Outside of Poland, the majority of new
While we have taken remedial steps to correct sizing and some of the
openings within the CEE took place in Bosnia and Romania, Serbia and
other range issues for FY25, which will address some of the missteps of
Czechia.
FY24, it is clear that Poundland will need to take significant steps in
order to recover performance and meet customers’ needs and
During FY25, our store location strategy will continue to be targeted into
expectations.
the CEE region, given the familiarity of these markets and our
confidence in driving returns, which will enable us to improve our strong
Dealz – Store growth of 17% and positive EBITDA
market position. There remains a significant white space opportunity in
our core CEE markets to meet our overall store targets over the next
Our Dealz stores in Poland offer well-known international FMCG brands
several years.
and GM at low prices, with 3,000 products across 18 sub-categories.
Dealz opened 48 net new stores during the year, reaching 331 stores in
Western Europe (“WE”) remains an important region for future growth for
total that now operate across Poland. Brand awareness continues to
Pepco, particularly within Iberia (Spain, Portugal) and Italy, which
grow quickly for our key target customers aged between 19-45 years old.
account for 87% of WE sales and 82% of stores. While we remain
confident in developing a store performance model that will allow us to
The performance of Dealz stores in FY24 improved over the prior year,
drive profitable growth and attractive returns in WE, we will continue to
and generated positive EBITDA for the first time, but was impacted by
manage the pace of new store openings in this region over the near
the introduction of Pepco-sourced GM from March 2024, which has not
term until we see appropriate and sustainable performance being
resonated with customers. In the FMCG category the market was highly
delivered.
competitive during the year driven by the large Polish food retailers, and
Dealz suffered from not having sufficient range differentiation which it is
The opening of a new distribution centre (“DC”) in Madrid, Spain during
reviewing. Strengthening the GM offer will be a key focus during FY25 in
September 2024 marks an important step in realising an appropriate
order to recover sales and improve gross margin.
economic model for our Iberian operations. It will structurally reduce
current high transport and distribution costs, while improving availability
in stores which should drive improved sales. The opening of the DC will
cut lead times on clothing and GM products within Spain and Portugal,
while lowering stock holding and distribution costs. The DC will help
support growth in the region for the foreseeable future.
13
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Our strategy in action
Optimising and expanding our store network
New distribution
centre to support
growth in Iberia
In September 2024, the Group launched its newest DC near Madrid,
Spain, a key milestone in enhancing returns and improving product
availability in stores. The opening of this new DC will significantly
reduce the transport cost and time for goods to reach our stores
across Spain and Portugal, which were previously served by DC Gyál in
Hungary.
The Guadalajara DC is essential for expanding our store footprint in
the Iberian region, supporting our growth in the coming years. It
features advanced stock handling capabilities, including a 140-metre
sorter machine that organises and prepares items for picking,
streamlining our operations and boosting efficiency. Stock arrives from
Asian vendors via the port of Valencia, as well as directly from
European vendors. The DC will achieve a full flow of goods to all Iberian
stores via ten transport hubs.
14
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Our strategy continued
Enhancing the customer offer
Whilst knowing our customers has always been a key focus, the growing competitiveness of the
markets in which we operate now demands that we further deepen our customer understanding,
enabling us to respond to their evolving needs with market-leading prices.
New Pepco collections every season
into the business to continue to support and drive our growth
130
agenda.
We invest in colleague training and development providing
mandatory, induction and development training to our people
at least on an annual basis through our regional training
Pepco – Better understanding our customers
centres. Additionally, we use tablets in stores to offer more
Improving our knowledge of customers is a key element of our
e-learning options. A key focus has been on improving internal
strategy. We regularly conduct surveys and talk to our
career pathways to retain the best talent. Reflecting on our
customers to understand more clearly consumer trends, brand
commitment to the development of our colleagues, we
equity and impacts of macroeconomic activity. This analysis is
promoted over 3,048 colleagues during FY24, which
then used across the business, from buying teams to
demonstrates our strong commitment to internal development.
procurement, in order to tailor our products and store layout to
our customers’ needs.
Refits and refurbishments
The business regularly adapts the offer to ensure a continuing
At the end of 2023, we paused our Pepco New Look
range of new products on store shelves. The offer is regularly
programme, where we were initially targeting to re-fit all c.
refreshed and improved with over 130 new collections every
2,500 Pepco stores in the CEE region, as it was clear we were
season.
not delivering the expected sales uplift and returns. As a result,
while 715 conversions took place in FY23, the number of store
Feedback from our customer surveys continues to highlight
refits dropped to 219 in FY24, which were mainly concentrated
that two-thirds of shoppers view low prices as the key reason
across Poland, Romania, Czechia and Slovakia. We are
for Pepco customers to visit a store. The chain has a large base
reviewing our store formats with a view to meeting better the
of loyal customers with over half visiting a store more than once
needs of our customers and future conversions will reflect a
a month. We know that customers have faced a more difficult
more considered investment approach as we continue to
financial period over the last year, which has meant greater
maintain and enhance our network.
appreciation for the affordability of Pepco’s customer offer.
Poundland grows digital presence
Poundland’s online business has grown rapidly, although from
a standing start, following the 2022 acquisition of Poundshop.
com, with orders more than doubling under Poundland
ownership. During the year, Poundland has transitioned
operations to a new distribution hub at Darton, South Yorkshire,
which gives the business extra capacity to expand its online
operations at pace. Last year, the business combined
Poundshop.com with its principal Poundland.co.uk website as
the natural next step in order to allow customers to shop from
a more tailored e-commerce offer from Poundland online. It is
clear customers are using the online channel for a different
shopping mission with a significantly higher average basket
online versus in store.
Poundland has continued to explore the potential for
increasing digital engagement with its customers. During the
year the business launched its first-ever Rewards app,
Poundland Perks, allowing customers to save more at the
check-out. Poundland Perks was previously on trial in around
100 stores on the Isle of Wight, Northern Ireland and Scotland,
before rolling out nationwide in October 2024. Customers are
rewarded for their spending to earn ‘Perks Points’ when they
spend in different parts of the store. Customers can then turn
these points into digital reward vouchers to spend in store or
online, or to save for a bigger purchase.
Investing in our people to enhance
customer satisfaction
We believe that the ability for colleagues to build rewarding
careers enhances both the service we provide to our
customers and our employment brand. We continue to invest in
the capability of our people both in terms of developing our
existing colleagues, and attracting new, high-calibre recruits
15
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Our strategy continued
Driving cost and operational efficiency
Our strategy has been to focus on improving profitability, cash generation and operational simplicity.
This requires a more disciplined approach to new store openings and investment in existing core markets,
addressing all non-core and underperforming areas of the business, and driving cost efficiency through
labour and end-to-end supply chain improvements to help offset inflationary pressures.
Operating costs (IFRS 16, excl. rent) as % of sales
Exit of Pepco Austria
28.6%
The Group announced on 19 February 2024 that it would cease its
operations in Austria. The Group entered the market in 2021 and
operated 73 Pepco stores in the country. The decision to discontinue
these operations was made as part of the Group’s review of
Innovation and optimisation to achieve efficiencies
performance across all its markets. Pepco Austria was losing cash
Labour efficiencies are a focus area in both Pepco, against a backdrop
EBITDA of about €1 million per month, such that the exit has improved
of a sustained high wage inflation environment in Central Europe, and
underlying EBITDA. Austria has been classified as a discontinued item in
Poundland given increases in labour costs. The businesses have
the financial statements. In total, Austria has led to a non-cash loss on
delivered a reduction in labour hours of 6.2 FTE per store in FY23 to 5.7 in
discontinued operations of €49 million largely reflecting impairment of
FY24 through a combination of investment in technology such as
loans and receivables payable to other subsidiaries of the Group. The
self-service tills, more efficient allocation of colleagues on the shop
cash costs associated with the exit of Austria all incurred during the year
floor, as well as changes in processes to reduce stock handling. In
amounted to approximately €13 million, including costs.
addition, the implementation of modern retail point-of-sale systems has
Modernising IT to provide platform for future growth
improved the speed and quality of service to our customers and
simplifies the work for our colleagues.
The rollout of a modern IT platform across the Group is fundamental to
the future successful growth of the business, providing a robust system,
Reviewing underperforming and non-core areas
while delivering operating efficiencies. We have been deploying an
Over the last 12 months, we have stopped non-core activities across the
Oracle ERP (enterprise resource planning) system across the Group.
Poundland successfully launched new modules during summer 2023,
business in order to focus on our core retail operations. This has included
cancelling early-stage plans for franchising and wholesaling
giving it a single, modern inventory management and finance solution,
while introducing enhanced visibility and management of financial
opportunities. We paused Pepco’s New Look refit programme across the
CEE markets, exited loss-making Pepco Austria, paused expansion of
data, along with greater efficiency in managing accounts payable.
our Pepco Plus format in Iberia, and undertook a rigorous performance
For Pepco, the development of a new ERP platform has been under
review of all stores across the Group. We have enforced greater
development over the past three years, specifically focusing on the
disciplines across our internal investment approvals and revisited our
deployment of an Oracle system supporting stock and finance, similar
store evaluation processes and capex to provide greater certainty on
to what had been implemented in Poundland. However, it became clear,
the results from new store openings and other investments going
following a review earlier in the year, that there were issues with the
forwards.
design and implementation plans for this system. We have now decided
to stop the programme, and instead will relaunch a revised programme
Move to a single Pepco format
with clearer objectives and timelines given the strategic changes in
Our Pepco ‘Plus’ store format, which is currently limited to Spain and
Pepco’s operations and growth aspirations. The recent recruitment of a
Portugal, offers FMCG in addition to our core range (clothing and GM).
new Group CIO will drive this relaunch in order to streamline our model
This format created additional complexity to our operations, alongside
to drive operational efficiencies.
the need for larger stores, higher levels of capex and consumed
additional time for management instead of focus on our core clothing
Continuing to diversify sourcing footprint
and GM categories. In order to simplify the business, and to focus on the
Pepco Global Sourcing (PGS), our captive wholly-owned sourcing entity
stronger returns delivered by our standard Pepco format, the Group
for clothing and GM, provides a key competitive advantage for the
announced during the year it had paused the rollout of new Pepco Plus
Group. Very few discount retailers have an integrated sourcing entity,
stores, pending a more detailed review of the future of this format within
instead relying on third-party agents. PGS was fully integrated into
the Group.
Pepco during FY23, helping to drive further operating efficiencies.
Pepco Plus represents a very small portion of the overall Pepco estate.
PGS supported the delivery of 22% unit volume growth year-on-year
At the end of FY24 we operated 123 stores all located in Spain and
during FY24 with its share of the Group’s buy (excluding branded
Portugal, accounting for 3% of overall Pepco stores.
products) increasing from 88% to 92% of our clothing and GM ranges. By
maintaining direct relations with over 375 suppliers, which represent over
Subsequent to the year end and following a detailed review of the
format, the Group has taken a decision to focus on its core clothing and
750 factories principally in Asia, we are able to achieve significant cost
benefits and negotiate better payment terms, with a consequent
GM format and to develop this to the best that we can make it.
Accordingly, we are closely evaluating the best positioning for our
positive impact on our working capital.
Pepco ‘Plus’ stores in Spain and Portugal over the next 12 months. We do
PGS has continued to focus on diversifying its sourcing footprint. PGS’ EU
not expect this to impact the business opportunity in these markets
sourcing office, in Poland, saw the value of FOB sourced in the region
given the expected growth opportunity for Pepco generally.
exceeding our initial expectations, although it remains a small
percentage of the overall buy. We expect these near-shore sourcing
operations to grow further in FY25, as some of our remaining direct
vendors migrate to PGS. We have also increased our sourcing flexibility
out of countries such as Cambodia and Pakistan.
16
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Delivering stronger cash generation through disciplined investment
Greater focus on disciplined capital investment has improved cash generation. This financial strength
positions us well to continue executing our growth strategy while maintaining a strong balance sheet.
FY24 free cash generation
operating cost efficiency. Following significant progress during
€168m
the year we have confidence that we can deliver improving
cash flow and value to our shareholders over the long term,
while maintaining a strong balance sheet and healthy liquidity.
By delivering more measured growth – doing less, to achieve
Capital allocation policy
more – the Group has taken a more disciplined approach to
The Group reviewed its approach to allocation of capital with
investment capex in FY24. This was principally related to
the overriding objective being to enhance shareholder value.
slowing new store growth and refits. The number of gross store
We will continuously assess our medium-term plans which take
openings was significantly lower in FY24 (509) compared to the
account of investment in the business, growth prospects, cash
prior year (806). We also spent significantly less on the Pepco
generation, net debt and leverage and shareholder returns.
store re-fit programme, with 219 conversions in FY24, compared
Our capital allocation framework is centred on maintaining a
to 715 in FY23.
strong balance sheet and ensuring the business operates with
With respect to our store investments, we reviewed our store
an ample level of liquidity. Where the Group generates excess
assessment model with a more stringent selection criteria and
cash, it will continue to prioritise investment to grow its business
revised financial targets to drive a better quality pipeline of
organically, consistent with attractive returns on capital.
new stores. In addition to this, we reduced capex spend per
Recognising the current strength of the balance sheet (FY24
store and optimised working capital requirements which
pre IFRS 16 financial leverage is 0.5x) and increasingly
helped drive an improved return on invested capital on our
cash-generative nature of the business, the Board has
newest stores.
decided to announce an inaugural full year dividend for FY24.
As a result, capital expenditure in FY24 was significantly lower
It is the Board’s intention to pay a dividend initially at a payout
y-o-y at €212 million (FY23: €382 million), which supported a
of 20% of full-year underlying net profit. The Board’s
strong improvement in free cash generation during the year.
expectation is that the absolute amount of dividend will remain
FY24 underlying operating cash flow was €906 million, which
stable or increase on a full-year basis, subject to any
increased by €174 million y-o-y. Free cash flow for the Group
significant internal or external factors.
was €168 million, an improvement of €274 million over the same
period last year.
Therefore, the Board has recommended a full year dividend of
6.2 Euro cents per share, subject to the approval of
In relation to supply chain, we opened a new distribution
shareholders at the Annual General Meeting that will be held
centre in Spain, to support better market economics for our
on 12 March 2025. Further detail, including payout dates, will be
operations in Iberia. This DC is in a ramp-up phase at present.
provided in due course.
In relation to IT, we have invested in enhancing cyber security,
POS terminals and systems and disaster recovery planning.
Alongside the dividend, the Board will also review on an
ongoing basis the potential for additional cash returns. Any
All capital allocation decisions moving forward will focus on
surplus capital identified over time may be returned to
supporting our strategic objectives of driving LFL sales,
shareholders by further dividends and/or share buybacks,
targeting higher quality growth, strengthening our core
subject to the Board’s discretion and shareholder approvals.
infrastructure and control environment and improving
17
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Market review
Navigating
industry trends
Pepco Group seeks to grow market share by better understanding our
customers and what is influencing their shopping decisions.
Knowing our customer
Economic conditions
We regularly engage with our customers to ensure that
At the start of 2024, the CEE region showed signs of
we understand their preferences, and can adapt our model
recovery after a period of stagnation, with inflation
as needed. Pepco conducted a customer survey earlier this
declining from a peak of 10.6% in October 2022 to an
year, confirming a number of facts:
estimated 2.4% by April 2024, primarily due to falling
retail energy prices. Despite a strong labour market and
•
Our core Pepco customer remains a mum on a budget.
double-digit wage growth, which outpaces core inflation,
The majority of our shoppers across all markets are
the rise in the saving rate to 14.4% has limited private
women, with nearly 80% professionally active and
consumption growth to just 1.3%, still below historical trend
having children in secondary education. Over half of
levels.
our customers are aged between 25 and 45.
While real disposable income growth suggests some
•
Two-thirds of respondents view low prices as the key
consumer prosperity, many customers continue to feel
reason to shop at Pepco stores. Other reasons include
the effects of the ongoing cost of living crisis.
an attractive product range and good value for money.
•
Pepco enjoys a large base of loyal customers, with over
What this means for us
half visiting our stores more than once a month.
Feedback from Pepco customers demonstrates a
challenging financial situation, with nearly half of
•
Over two-thirds of customers who enter a Pepco store
respondents complaining of deterioration over the last
make a purchase, confirming that the Pepco shopping
year due to inflation. This underscores the need to
experience meets visitors' expectations and delivers
further emphasise our price and value proposition.
the products they seek.
•
Pepco customers admit they have faced a difficult
Our response
period recently, with nearly half feeling their financial
•
Maintaining price leadership will remain a core focus,
situation has deteriorated over the last year due to
particularly across key value items.
inflation. This underscores the need to further emphasise
•
Continuing to prioritise convenience in our retail footprint
our price and value proposition.
by ensuring that our shops are located closely to where
our customers live, work and play.
•
Maintaining regular engagement with our customers to
understand and adapt our product ranges to their needs.
Link to strategy
Link to strategy
18
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Link to strategy
Investing in
Optimising and expanding
Enhancing the
Driving cost and
infrastructure and people
our store network
customer offer
operational efficiency
to support growth
Discount retail trends
Supply chain
Retail sales in Europe are forecast to increase by
With 30% of global container trade transiting through the
approximately 3.7% in real terms in 2024, supported by real
Suez Canal, the unprecedented Red Sea shipping crisis,
disposable incomes moving back into positive territory as
resulting from conflict in the Middle East, upended supply
inflation continues to slow. The evolution of consumer
chains and increased shipping costs during the year. This
spending habits and the prioritisation of experience
caused the prices of some routes, particularly from Asia to
spending is expected to continue, positively impacting
Europe, to surge nearly five-fold, whilst also extending
discretionary spend.
shipping times to our key ports.
The discount retail segment has grown more strongly over
What this means for us
recent years. The Polish clothing market has grown by 25%
As a result, the Group experienced elevated spot freight
since 2021 according to Euromonitor, with strong levels of
rates and delays to container lead times. The majority of
growth forecast to continue. The discount home market has
our freight costs were contracted, but the business still
seen similarly strong growth, up by 17% since 2021 in Poland.
faced additional surcharges from carriers in relation to the
longer shipping routes being taken.
What this means for us
Pepco has maintained a strong market position in its core
In addition, these supply issues led to lower-than-expected
categories. In kidswear, Pepco has continued to grow its
stock at various points in the year, with stock typically
market share which is over 30% in Poland. Market share in
taking two to four weeks longer to hit shelves.
homeware has grown by five percentage points over the
Nevertheless, we saw the gradual improvement of inventory
last five years to 12%.
quality in Pepco during the year, with older stock from
There remains a significant white space opportunity in our
previous seasons being removed through mark down, which
core CEE markets, for example in key countries like Romania,
improved the mix towards higher-margin newer stock that is
Hungary, Bosnia and Herzegovina, Bulgaria and Serbia.
selling strongly.
There are also new CEE markets open to us in the future
including Macedonia, Kosovo and Albania.
Our response
•
As we move into the new year, we are seeking to mitigate
In Western Europe, there remains significant opportunity to
supply issues by shipping product earlier from factory
grow new stores in our existing markets, particularly in Spain
which is expected to improve availability.
and Italy, over the medium term, without the need to seek
new country locations.
•
We are optimising shipping routes to ensure the fastest
delivery times relative to cost.
Our response
•
We are using a variety of carrier options, including air and
•
Continue to offer a range of product choices.
train freight, where there is a more pressing need to
•
Maintain price leadership against key competition.
receive stock quickly, particularly focused around
seasonal goods.
•
Our new DC in Madrid, Spain will also help improve
availability to our stores in Iberia by improving delivery
times.
Link to strategy
Link to strategy
19
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Key performance indicators
Monitoring performance
across the Group
The following key performance indicators (KPIs) include Alternative Performance Measures (APMs).
The Directors use APMs1 as they believe these measures provide additional useful information on
the Group’s performance.
R The Group has environmental and social KPIs and targets which are shown on page 35
Link to strategy
Investing in
Optimising and expanding
Enhancing the
Driving cost and
infrastructure and people
customer offer
operational efficiency
our store network
to support growth
Store growth
Total Space
Revenue growth
Number of net new stores 2,3
Retail trading space (‘000 sqm)
Total sales growth (%)
FY24
392
FY24
2,343
FY24
10.2
FY23
648
FY23
2,115
FY23
16.8
Achieving profitable growth drives our
Retail trading space of 2.3 million square
Like-for-like sales growth (%)
ability to create value in the long term.
metres represents an increase of 10.8%
year on year.
We took a more disciplined and targeted
approach to growth in FY24 with 392 net
FY24
(3.2)
new store openings in FY24, leading to
4,948 overall stores.
FY23
6.0
Definition and relevance:
Definition and relevance:
Definition and relevance:
Net store numbers accounts for store
Trading space is defined as retail
LFL growth is fundamental to our Group
closures during the year.
trading space including tills, excluding
strategy in delivering operating leverage.
back-of-house and changing rooms.
Disciplined and controlled store growth
LFL revenue growth is defined as
is fundamental to our Group strategy.
Store space growth allows us to extend
year-on-year revenue growth for
our ranges and drive profitability.
stores open beyond their trading
anniversary and is reported on a
constant currency basis.
Link to
Link to
Link to
strategy
strategy
strategy
R Read more in our strategy section on pages 12 to 19
1
APMs are not defined under IFRS Accounting Standards and therefore may not be directly comparable with other companies’ APMs. These measures are not intended
to be a substitute for, or superior to, IFRS Accounting Standards measurements. See note 27 for definitions of APMs.
2
New store numbers exclude Pepco Austria, which the Group exited from in February 2024.
20
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Profit
Stock
Underlying EBITDA IFRS 16 (€m)
Underlying EBITDA IFRS 16
Stock holding (€m)
Margin (%)
FY24
944
FY24
15.3
FY24
1,235
FY23
754
FY23
13.5
FY23
1,120
Underlying EBITDA of €944 million
EBITDA margin is 180 basis points up
Group stock holding has increased by
represents a growth of 25% against FY23.
year-on-year driven by a significant
10% against FY23 as a result of both
gross margin recovery.
the growth of the business and earlier
purchase of inventory related to
mitigating supply chain delays.
Definition and relevance:
Definition and relevance:
Definition and relevance:
Underlying profit before tax, net finance
Underlying profit before tax, net finance
Stock at cost post net realisable value
costs, depreciation and amortisation.
costs, depreciation and amortisation,
(NRV) provisions.
Prepared on an IFRS 16 basis.
divided by sales excluding VAT. Prepared
The cost of stock directly impacts the
on an IFRS 16 basis.
IFRS 16 is the accounting requirement
profitability of sales. Aligning inventory
under which EBITDA is reported.
IFRS 16 is the accounting requirement
levels with sales expectations is crucial to
under which EBITDA is reported.
ensuring optimal stock holding.
Link to
Underlying EBITDA pre-IFRS 16
Underlying EBITDA pre-IFRS 16
strategy
(€m)
margin (%)
FY24
515
FY24
8.3
FY23
402
FY23
7.2
Cash generation
EBITDA margin is 110 basis points up
Underlying increase of 28% driven
year-on-year driven by a significant
by revenue growth and recovery
Free cash flow
gross margin recovery.
of gross margin.
FY24
168
Definition and relevance:
Definition and relevance:
Underlying profit before tax, net finance
Underlying profit before tax, net finance
FY23 (106)
costs, depreciation and amortisation.
costs, depreciation and amortisation,
Prepared on an pre-IFRS 16 basis.
divided by sales excluding VAT. Prepared
on an pre-IFRS 16 basis.
Pre-IFRS 16 EBITDA is the Group’s leading
The Group’s cash generation materially
metric on profitability.
Growing EBITDA margin is a key focus
stepped up reflecting solid EBITDA
within our profit and loss statement.
generation in conjunction with lower
capital expenditure.
Definition and relevance:
Cash generated from operations, after
lease costs and working capital
movements but pre-capital expenditure,
Link to
Link to
funding and investment.
strategy
strategy
Executing in a disciplined manner with
a strong emphasis on efficient working
capital and returns will deliver strong
cash flows.
Link to
strategy
21
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Financial review
A mixed scorecard
Underlying EBITDA YoY
+25.2%
Net Cash from Operations (pre-Capex)
€379m
Introduction
The Group experienced a mixed performance during FY24. While
revenues hit record levels at €6.2bn (+10.2%), this was driven by new
store expansion, against negative like-for-like (“LFL”) sales (-3.2%)
in all three brands. Pepco saw quarter-on-quarter improvements
in its LFL sales performance through the year, exiting the year in
September with positive LFL. We will continue to focus on
consistent LFL sales growth as a key priority for the Group across
all brands.
Notwithstanding the challenging top line, we delivered better, and
earlier than expected gross margin recovery, driven by Pepco. This
progress was driven by a combination of better buying from our
suppliers, while also benefitting from a more favourable foreign
exchange environment and normalised freight costs. Group gross
margin improved by 390bps to 43.9% (FY23: 40.0%), while Pepco’s
Neil Galloway
gross margin increased by 530 bps to 46.9% (FY23: 41.6%),
Chief Financial Officer
recovering to its pre-Covid levels.
This margin recovery, alongside an improving focus on costs, lifted
FY24 Group underlying EBITDA (IFRS 16) to a record €944m, up
25.2% on the prior year. This was largely as a result of the
improvement in Pepco’s underlying EBITDA which increased 41.7%
A strong gross margin
to €785m (FY23: €554m). In contrast, Poundland EBITDA declined
recovery at Pepco and
by 21.5% to €153m (FY23: €195m), due to weak execution on the
transition to Pepco-sourced clothing and general merchandise
greater investment discipline
(“GM”). Dealz delivered positive EBITDA of €24m, although
delivered record underlying
undershot its target for the year due to the impact of transitioning
profit and a better cash
to Pepco-sourced GM.
performance, but this offset a
With tighter discipline on investment spending, particularly driven
by reduced store openings, capex reduced significantly to €212m
weak top line, with negative
for the year, 45.0% lower than FY23 spend of €382m. Alongside
LFL sales, and a significant
continued focus on improving working capital and optimising our
deterioration in Poundland’s
supply chain finance programme, net financial debt for the year
reduced to €256m (FY23: €411m), the lowest level since the
performance.
Company’s IPO in 2021. As a ratio of EBITDA, pre IFRS 16 net
financial leverage declined to 0.5x in FY24 (from 1.0x in FY23). With
a healthy balance sheet and stronger cash generation the Group
is well positioned for future growth.
22
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
We took decisive action to exit Austria during the year, given the
We identified a number of areas of focus in FY24 to drive an
underperformance across almost all stores in that market and
improvement in financial performance, the following of which we
with limited prospect of turning around performance in the
have delivered:
medium term. This has allowed better focus in our key markets.
•
A recovery in FY24 gross margin, which increased from 40.0% to
The impact of exiting Austria has been classified as discontinued
43.9% year-on-year, principally driven by the improvement in
operations in our financial statements.
Pepco by 530bps to 46.9%.
In February 2024, our discovery of a fraudulent phishing attack in
•
An improvement in the 4-wall cash EBITDA of our core Pepco
Hungary, perpetrated through a sophisticated social engineering
business in CEE to pre-Covid levels, a target which has been
scam, led us to review both our financial and IT control
exceeded during the year. Our average 4-wall cash EBITDA per
environment to guard against any future similar events occurring.
store in core CEE stores was €218k in FY24 compared with €217k
Despite proactively working with the relevant authorities, it is
in FY19.
unlikely we will recover any of the funds which were the subject of
•
the fraud.
A slow-down in store expansion with greater focus on improving
returns on investment through ensuring we open higher quality
As a result of the material underperformance in Poundland, along
stores in our core markets. We opened 509 stores (net 392) in
with slower growth prospects and a higher cost outlook in the UK
FY24 compared with 806 stores in FY23 (net 648) with a
following the recent budget, we have assessed the carrying value
significant reduction in new store capex spend at €129m,
of that investment and recognised a non-cash impairment of the
compared with €207m in the prior year. Most of the stores
goodwill and brand asset related to Poundland of €775m, which
opened in FY24 have been focused on our core CEE markets
has driven a reported net loss for the year for the Group of €662m.
where we continue to deliver strong returns.
On an underlying basis, Group net profit for FY24 was €179m, up
•
14.0% on the prior year.
Halting our New Look programme, which did not deliver the
required return on investment, resulted in a €38m reduction in
Strategic focus
capex compared to the prior year.
For much of FY24 the focus across the business was on
Where we have underperformed relative to our expectations was
remediating challenges resulting from the over-ambitious pace of
in our sales targets, with negative LFL sales for the year across all
store expansion across FY22 and FY23, stretching our resources
three brands. Our positive sales performance for the year was
and infrastructure. From a financial perspective we have four key
driven by store expansion from FY23 (as we annualised prior year
operating levers at our disposal to drive profitability and cash
openings) and FY24. The need to drive positive LFL sales is a key
generation across our business. These levers, which are covered
focus area for FY25.
throughout the financial review are:
We also experienced higher operating costs. This was partly
•
Revenue underpinned by LFL performance, supplemented with
related to budgeting our costs for a better sales outturn, which
growth through new store expansion. Key to driving sales is our
did not materialise, alongside experiencing continuing inflationary
ability to deliver a relevant product offer at leading price points
challenges in many of our key markets, particularly for labour.
to retain our existing customers and attract new ones.
With the underperformance of both Poundland and Dealz in
•
Gross margin driven by category mix and our ability to optimise
adapting to Pepco-sourced clothing and GM ranges, it became
sourcing and buy better, while managing certain external
clear during the year that transitioning to a single business and
factors such as foreign exchange movements, freight and
customer offer was not working as expected. Consequently, while
commodities, balanced with maintaining a price leadership
each of Poundland and Dealz will have the option to continue to
position and managing stock.
source from Pepco’s product range, they will have increasing
flexibility to source their own ranges appropriate for their markets
•
Operating costs principally across our store operations in
and customers. This has resulted in some incremental costs as
addition to our supply chain, central functions and head office.
they resource for this compared with previous plans of closer
Notwithstanding inflationary challenges it is critical we focus on
integration with Pepco.
growing our sales ahead of costs and drive greater operating
leverage through cost efficiencies coming from increased scale.
Aside from the trading performance, we also experienced some
disruption and higher costs during the year related to our exit from
•
Cash generation through a combination of discipline on
Austria (shown as a discontinued operation) and the impact of the
investment spending, with increasing focus on returns, and
fraud we experienced in Hungary. Following on from the latter
effective management of our working capital principally driven
event there was a detailed review of both our IT and control
by focus on stock and supplier management.
environment, with a variety of actions taken to strengthen these
further in order to limit any likelihood of a future recurrence.
23
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Financial review continued
Strategic focus continued
In relation to challenges with our supply chain during the year, the
The Group’s and Pepco’s LFL performance over recent and
events in the Middle East disrupted shipping. This resulted in
prior periods helps to illustrate these factors, particularly
longer lead times of containers arriving at our operating ports,
the performance drop off in H2 FY23 following a strong H1.
and having to carry additional stock in the business, all of which
were unplanned. Further temporary delays were incurred later in
LFL% Evolution
the financial year, due to the political protests in Bangladesh, a
key sourcing market for our clothing.
2.6%
Trading environment
FY19
Trade across the Group in FY24 remained challenging despite
6.1%
improvements in macroeconomic indicators in our key markets.
Whilst inflation and interest rate pressures receded from the levels
-5.2%
seen in FY23, they remained relatively high in most markets where
we operate relative to historical levels, which maintained pressure
FY20
-7.1%
on our consumers as to how they prioritised their spend. While
Pepco still retains, and has improved, a strong price leadership
position in its key clothing and GM categories across the CEE
6.5%
region, we are increasingly operating under a more intense
FY21
competitive environment.
9. 8%
Various supply chain issues affected the consistent and timely
availability of stock in-store, which impacted trade for most of
5.2%
FY24. Product availability issues due to supply chain delays were
FY22
increasingly mitigated by shipping product earlier, optimising
7. 4%
shipping routes, and selectively utilising faster carrier options.
However, this led to some surcharges in freight rates as containers
had to travel longer routes. Expedited methods, such as air or
6.0%
train freight, needed to be used to guarantee timely stock
FY23
availability, particularly for our seasonal ranges.
6.2%
In Pepco, the combination of supply chain delays impacting store
availability, together with the more difficult competitive
-3.2%
landscape contributed to negative LFL sales for FY24 of -2.8%. This
FY24
improved sequentially quarter-on-quarter through the year and
-2.8%
we exited the year with positive LFL sales in September 2024. We
also made progress in the improvement of inventory in Pepco
through the year, with older stock from previous seasons being
6Yr CAGR Pepco Group +1.9%
removed through mark down, improving the overall mix towards
6Yr CAGR Pepco +3.1%
higher-margin newer stock.
In the UK, where Poundland operates, we saw increasing
Pepco Group
Pepco
competition from the larger format retailers during the year for
share of the customers’ FMCG spend, resulting in weaker FMCG
sales (+1.6% LFL) and margin, as we sought to mitigate this
challenge. Performance was principally affected by the transition
to Pepco sourced clothing and GM products, which has not met
customers’ expectations for a variety of reasons. In clothing (-19.1%
LFL), there were issues with the offer not fully replicating the
previous breadth or depth of Poundland’s men’s and women’s
ranges and coverage across sizes. In addition, with average unit
prices being materially below Poundland’s prior offering (-14.9%),
the business required significant increases in volume to deliver
improving LFL sales which it was unable to achieve. GM (-9.1% LFL)
was also impacted by the Pepco offering not resonating with our
UK customers and some of the more traditionally relevant GM
products being phased out, for example, some traditionally strong
seasonal ranges. LFL sales in Poundland was -3.6% for the year,
despite Q1 being +0.9%.
Dealz also traded below expectations with LFL for the year
landing at -4.8%, reflecting intense competition from other food
retailers, including well established supermarkets, as well as issues
with the Pepco-sourced GM offering.
24
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
FY24 financial performance
Profit & Loss Account review
The Group delivered strong FY24 underlying IFRS 16 EBITDA growth at +25.2%, with 180bps of EBITDA margin expansion. This was principally
driven by the strong gross margin performance by Pepco following a normalisation of commodity costs, better contracting with suppliers,
favourable FX movements and a stabilisation of container costs from the prior year.
Operating costs increased by 18.6%, which was driven principally by store expansion and the impact of inflationary pressures, particularly
on wages. With weaker than anticipated sales throughout the year, the Group’s operating leverage deteriorated by 200bps vs prior year.
Recognising this, we are taking a more intense approach to both operating costs and capital investment as we go forward.
FY23
YoY
YoY
Pepco Group (€m)
FY24
(restated)
(reported)
(constant)
Revenue
6,167
5,596
10.2%
8.1%
Like-for-like revenues (%)
-3.2%
6.0%
n/a
n/a
Gross profit
2,706
2,239
20.9%
18.7%
Gross profit margin (%)
43.9%
40.0%
390 bps
390 bps
Operating costs
(1,762)
(1,486)
18.6%
16.2%
Operating costs %
28.6%
26.6%
200 bps
200 bps
Underlying EBITDA
944
754
25.2%
23.3%
Underlying EBITDA margin
15.3%
13.5%
180 bps
190 bps
Underlying EBITDA (pre-IFRS 16)
515
402
28.1%
26.6%
Underlying EBITDA margin (pre-IFRS 16)
8.3%
7.2%
110 bps
120 bps
Depreciation and amortisation
(564)
(459)
22.9%
20.5%
Underlying EBIT (IFRS 16)
380
295
28.8%
27.8%
Net financial expense
(109)
(81)
34.6%
32.1%
Underlying PBT
271
214
26.6%
25.7%
Underlying PAT
179
157
14.0%
15.3%
Underlying EPS (cents)
31.1
27.2
14.3%
15.4%
Impairment of Poundland
(775)
-
n/a
n/a
Other non-underlying items
(50)
(55)
-9.1%
-12.7%
Reported PBT
(554)
159
<-200%
<-200%
Tax
(108)
(50)
116.0%
110.0%
Reported PAT
(662)
108
<-200%
<-200%
Reported EPS (cents)
(114.9)
18.8
<-200%
<-200%
Loss from discontinued operations
(49)
(12)
<-200%
<-200%
FY23
YoY
FY24
(restated)
(reported)
Net debt
1,631
1,692
-3.6%
Leverage: Net debt to EBITDA
1.7x
2.2x
-0.5x
256
Net debt (pre-IFRS 16)
411
-37.7%
Leverage (pre-IFRS 16): Net debt to EBITDA
0.5x
1.0x
-0.5x
1
Numbers above based on continuing operations and according to IFRS 16 unless stated otherwise.
2
Pepco Austria is classified as a discontinued operation following the Group’s exit of Austria. All numbers above (including comparators) exclude Pepco Austria.
25
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Financial review continued
FY24 financial performance continued
Revenue
Group revenue of €6.2bn grew +10.2% during the year driven by continued store expansion, with 392 net new stores opened in the year. LFL
revenue of -3.2% saw all three brands report negative LFL revenue during the year. While Pepco saw sequential improvement quarter-on-
quarter during the year, and exited the year with positive LFL revenue in the month of September, there is intense focus on delivering
positive sustainable LFL revenues as we move into FY25.
Sales Growth %
Pepco
Poundland
Dealz
Total
Q1 LFL
(3.5%)
0.9%
(4.6%)
(2.2%)
Q2 LFL
(2.8%)
(2.8%)
(4.6%)
(2.9%)
Q3 LFL
(2.7%)
(6.9%)
(7.3%)
(4.3%)
Q4 LFL
(2.2%)
(6.4%)
(2.8%)
(3.5%)
FY LFL
(2.8%)
(3.6%)
(4.8%)
(3.2%)
Sales Growth %
Pepco
Poundland
Dealz
Total
Q1 Total
16.2%
3.5%
52.1%
13.0%
Q2 Total
16.4%
7.9%
57.3%
14.9%
Q3 Total
13.7%
(0.7%)
30.1%
9.2%
Q4 Total
10.3%
(8.5%)
23.4%
4.1%
FY Total
14.2%
0.2%
39.5%
10.2%
Gross Margin %
Operating costs
Group gross margin increased by 390bps YoY to 43.9% in FY24,
FY24 Group operating costs increased by €276m to €1,762m (FY23:
driven by the 530bps YoY improvement in Pepco gross margin to
€1,486m). The largest element of our operating costs relates to the
46.9%. During the year, the Group’s principal currencies of Polish
costs of operating our stores, which increased by 13% during the
Zloty, British Pound and Euro strengthened against our main
year, from €1,165m in FY23 to €1,310m in FY24, driven by an increase
purchasing currencies of US Dollars and Chinese Yuan which
in trading space in Pepco. Store costs are principally driven by
delivered a transactional FX benefit to the gross margin,
movements in rent, labour and utility costs and the growth in the
particularly in the second half of the year. This benefit is expected
overall number of operated stores.
to continue to support margin in FY25.
Store costs
Gross
The ratio of Group store operating costs to revenues increased by
margin %
Pepco
Poundland
Dealz
Total
40bps to 21.3% in FY24 (from 20.8%), driven by lower-than expected
LFL growth during the year and store labour cost increases in both
Q1
42.9%
39.6%
31.7%
41.7%
Pepco and Poundland due to inflationary pressures and minimum
45.0%
Q2
49.1%
37.8%
32.9%
wage increases in the UK. Rent costs also increased 21.2% to
Q3
47.3%
38.4%
35.6%
44.3%
€459m.
Q4
49.5%
38.1%
33.6%
45.2%
SG&A costs
FY
46.9%
38.6%
33.4%
43.9%
FY24 Group SG&A costs increased to €452m in FY24 (from €321m in
FY23) driven largely by increases in payroll costs, including
During the fourth quarter of FY24, Pepco commenced a series of
bonuses, due to headcount growth and wage inflation, additional
targeted product price investments to maintain its price
store opening and closure costs, increased IT system running
leadership position, which will continue into FY25. This, together
costs and investments in strategic projects across the Group.
with a stronger focus on ensuring availability of key products lines
and seasonal ranges, are some of the actions that we expect will
underpin the recovery of sales into FY25.
26
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Underlying EBITDA
Group underlying (IFRS 16) EBITDA increased 25.2% to €944m (FY23
€754m) during the year largely driven by sales growth coming from
increasing store numbers, and gross margin expansion, offset by
higher operating costs, principally linked to store expansion.
Group underlying (pre-IFRS 16) EBITDA of €515m (8.3% of sales)
represents an increase of 28.1% year-on-year.
Segmental reporting
During FY23, we reviewed the changing operating and financial
profile of the Group as it continues to evolve and expand. We took
a decision to change the segmental reporting of the Group in
FY24 as follows:
Presentation of financial information
•
Four geographic segments: UK and Republic of Ireland (“ROI”),
Poland, Central and Eastern Europe, and Western Europe; and
Where appropriate the financial information has been
quoted on an “underlying” basis, removing the impact of
•
Three trading segments: Pepco, Poundland, Dealz.
“non-underlying” items, defined as material and unusual in
Geographic segments
nature, in order to help the reader better understand the
The business delivered strong sales growth in all regions other
key drivers of business performance. Please refer to note 27
than the UK and ROI, driven by the growth of stores in these
of the financial statements for detail on use of APMs for
markets. The Group’s revenue growth during the year was driven
further information.
by a strong performance from Pepco and Dealz.
Like-for-like revenue
FY24
FY23
(%)
(%)
UK & ROI
(3.6%)
5.5%
Poland
(3.6%)
4.9%
CEE
(1.7%)
8.3%
Western Europe
(6.5%)
(0.3%)
Total
(3.2%)
6.0%
27
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Financial review continued
Segmental reporting continued
Revenue
Revenue by Geographic Location (€bn)
FY24
Poland +14% 5-year CAGR
vs FY23
Other CEE +19% 5-year CAGR
€m
FY24
FY23
(%)
UK & Ireland +3% 5-year CAGR
6.2
UK & ROI
2,006
2,001
0.2%
5.6
0.6
Poland
1,618
1,414
14.4%
4.8
0.4
CEE
1,950
1,816
7.4%
4.1
0.2
2.0
3.5
0.1
1.8
Western Europe
592
365
62.2%
3.4
1.5
0.1
1.2
Total
6,167
5,596
10.2%
0.9
0.8
1.6
1.4
1.2
1.1
0.8
0.9
Trading segments
Pepco represents 62.5% of total Group FY24 revenue (FY23: 60.3%)
1.9
2.0
2.0
1.8
1.7
1.7
and more than the entirety of the Group’s FY24 operating profit.
Poundland and Dealz contributed 32.5% and 5.0% of total FY24
FY19
FY20
FY21
FY22
FY23
FY24
revenue respectively (FY23: 35.8% and 3.9%). The significant
change in operating profit contribution was driven by an
UK & Ireland
Poland
Other CEE
Other WE
improvement in performance in Pepco and Dealz, while
Poundland performance declined due to the negative
performance of its clothing and GM categories following a poor
transition to Pepco-sourced products.
Geographic Location Revenue Mix
FY24
FY23
Like-for-like revenue
(%)
(%)
1%
2%
2%
4%
7%
10%
Poundland
(3.6%)
5.5%
24%
25%
28%
Pepco
(2.8%)
6.2%
31%
32%
32%
Dealz
(4.8%)
11.3%
24%
25%
26%
Total
(3.2%)
6.0%
25%
25%
26%
FY24
51%
48%
vs FY23
44%
39%
36%
33%
Revenue (€m)
FY24
FY23
(%)
Poundland
2,006
2,001
0.2%
Pepco
3,853
3,375
14.2%
FY19
FY20
FY21
FY22
FY23
FY24
Dealz
307
220
39.5%
UK & Ireland
Poland
Other CEE
Other WE
Total
6,167
5,596
10.2%
FY24
Total revenue
vs FY23
Underlying (IFRS 16)
Operating profit (€m)
FY24
FY23
(%)
EBITDA
Poundland
(3)
43
-107.0%
Pepco
411
271
51.7%
Dealz
(8)
(14)
42.9%
Other
(20)
(5)
<-200.0%
Total
380
295
28.8%
Pepco
62%
Pepco
82%
Poundland
33%
Poundland
16%
Dealz
5%
Dealz
3%
28
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Pepco
Pepco
Pepco FY24 sales grew at +14.2% driven by the annualisation of
store openings in FY23, along with the in-year impact of opening
3311 net new stores in FY24. This took the total number of Pepco
Revenue
stores to 3,781, with new space growth of +11%. LFL revenues
€3,853m
landed at -2.8% for the year, albeit showed a steady improvement
quarter-on-quarter, exiting the year in positive territory.
+14.2%
In FY24, Pepco did not enter any new territories, as management
focused its attention on rebuilding profitability in its core CEE
FY24
€3,853m
region, alongside tighter capital investment and delivering
operational improvements. We continued the expansion into
FY23
€3,375m
Western Europe, but at a slower pace than in FY23, with 99 new
stores opened (vs. 302 in FY23), predominately in Italy (+42) and
Spain (+29). In February 2024 the group announced the exit from
LFL
Austria, as the market had not achieved the level of profitability
-2.8%
that was expected and to focus management’s attention on
driving results in more profitable markets.
As we move into FY25, we are seeing some early signs of recovery
driven by better performance of our key value items in GM and
FY24
-2.8%
clothing, reflecting better prices alongside improved stock
availability in our stores.
FY23
6.2%
FY24 Underlying operating costs (IFRS 16) in Pepco has increased
Gross margin
by 20.1% year-on-year in absolute terms. A large portion of this
46.9%
relates to the expansion of the estate, inflationary pressures, cost
associated with upgrading capacity and capability in specific
teams and investment in strategic projects.
+530bps
Pepco’s FY24 underlying EBITDA (IFRS 16) increased by 41.7% to
FY24
46.9%
€785m (FY23: €554m), with the underlying EBITDA margin
expanding 400bps year-on-year to 20.4%. This was driven by
FY23
41.6%
gross margin improvements, partly offset by cost headwinds. On a
pre-IFRS 16 basis, FY24 underlying EBITDA was €504m, up by 48.7%
versus FY23.
EBITDA
20.4%
1
The opening balance of 3,523 Pepco stores (as at 30 September 2023) has
been restated to 3,450 to account for the 73 discontinued Austria stores. This is
made up of the 53 stores as at the end of FY22 taken out of the FY23 opening
+400pbs
balance and 20 stores opened in FY23.
FY24
20.4%
FY23
16.4%
EBITDA pre-IFRS
13.1%
+300bps
FY24
13.1%
FY23
10.1%
29
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Financial review continued
Poundland
Poundland
Poundland’s FY24 performance was characterised by a weak
performance in LFL sales (-3.6%). The main driver of LFL sales
underperformance was led by GM (-9.1%) and clothing (-19.1%),
Revenue
following the transition to Pepco-sourced ranges at the beginning
€2,006m
of the year. FMCG, which is 67% of Poundland’s sales mix, delivered
+1.6% LFL sales for the year, with consumers continuing to
experience pressure from macroeconomic factors.
+0.2%
Issues with Poundland’s new Pepco-sourced ranges include the
FY24
€2,006m
new clothing offer not fully replicating the previous depth of
Poundland’s men’s and women’s ranges, coverages across sizes,
FY23
€2,001m
as well as relatively low unit prices. In GM, the offering did not
resonate with the UK consumer, and some of the more traditionally
LFL
relevant products and categories, such as stationery and
-3.6%
gardening, being phased out, or with reduced space allocation in
stores.
Stock shrink also become a material issue for Poundland, rising to
c. €52m in FY24, up 30% over the last two years. Management is
FY24
-3.6%
committed to putting measures in place to minimise the impact of
this widespread industry trend, while also seeking to ensure the
FY23
5.5%
safety of our store-based colleagues.
Gross margin for the year expanded by 100bps, following better
Gross margin
margin from the Pepco ranges and benefits from reduced
38.6%
container costs. Further margin benefits were limited by the mix
impact from a disappointing performance in GM and clothing.
+100bps
Operating costs (IFRS 16) as a percentage of sales increased by
300bps to 30.9%. This is due to provision releases in FY23,
FY24
38.6%
compounded by inflationary pressures across FY24,
predominately due to UK wage inflation. SG&A cost increases in
FY23
37.6%
Poundland were driven by one-off adjustments in FY23 that were
not repeated in FY24, increased Oracle running costs following the
EBITDA
full deployment on this system in Poundland, and one-off
7.6%
marketing costs related to a TV campaign.
Poundland reported FY24 EBITDA (IFRS 16) of €153m, below the
-220bps
prior year at €195m. EBITDA margin declined by 220bps to 7.6%.
Pre-IFRS 16 EBITDA was €28m in FY24, falling by 62.7% due to sales
FY24
7.6%
underperformance, provision movements and year-on-year
inflationary cost increases.
FY23
9.8%
EBITDA pre-IFRS
1.4%
-240pbs
FY24
1.4%
FY23
3.8%
30
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Dealz
Dealz
Similar to Pepco, Dealz delivered strong sales growth of 39.5%,
driven by space growth, as LFL sales landed at -4.8%. Dealz
added 48 net stores during the year, all in Poland, the only country
Revenue
in which the company now operates. The negative LFL sales result
€307m
was driven by the weak performance in GM (-11.9%) as a result of
the transition to Pepco-sourced ranges at the beginning of the
year. FMCG also performed below expectations with a LFL of
+39.5%
-2.8%, impacted by a highly competitive food market in Poland.
FY24
€307m
Gross margin for the year expanded by 430bps to 33.4%. This was
driven by FX benefits as a result of the relative strength of the
FY23
€220m
Polish zloty against Dealz’ buying currencies. IFRS 16 operating
costs as a percentage of sales improved by 40bps to 25.5%, driven
by sales leverage, helping to offset the absolute increase in the
LFL
cost base (+€21m) as a result of the store expansion, as well as
-4.8%
other inflationary pressures.
At an IFRS 16 level, Dealz EBITDA increased by €17m, to hit €24m in
FY24, driven by revenue growth. This represents a 470bps EBITDA
margin expansion year-on-year. FY24 pre-IFRS 16 EBITDA was
FY24
-4.8%
€3m, increasing from a EBITDA of €(8)m in FY23.
FY23
11.3%
Gross margin
33.4%
+430bps
FY24
33.4%
FY23
29.1%
EBITDA
7.9%
+470bps
FY24
7.9%
FY23
3.2%
EBITDA pre-IFRS
0.9%
+450bps
FY24
0.9%
FY23
-3.6%
31
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Financial review continued
Profit before tax
Non-underlying items
FY24 Group statutory loss before tax was €554m (FY23: profit of
In FY24 non-underlying items totalled €825m (FY23: €55m)
€159m), driven principally by the non-cash impairment of
including:
Poundland. At an underlying level, FY24 Group underlying PBT
•
€775m relating to the non-cash impairment of Poundland
increased by 26.6% to €271m (FY23: €214m).
(primarily goodwill)
Our effective interest rate has increased to 6.85% (FY23: 3.75%) due
•
€29m relating to ERP Software-as-a-Service (SaaS) costs which
to our secured bond incurring interest of 7.25% and other debt
is considered to be unusual and material costs by nature
facilities being subject to variable interest rates which have
increased year on year. These facilities, including the increased
•
€16m relating to the fraud in Hungary
revolving credit facility (RCF) from €190m to €390m, provide
•
€4m relating to Poundland restructuring
additional liquidity given the ongoing growth and expanding
•
scale of the business.
€1m relating to the Value Creation Plan (VCP) scheme
Other than the fraud in Hungary the other non-underlying items
Taxation
are consistent with prior reporting.
In FY24 the Group’s tax charge was €108m (FY23: €50m),
Discontinued operations
representing an effective tax rate of -19.4% (FY23: 31.8%). Our
effective tax rate is significantly distorted by non-underlying items
The Group announced on 19 February 2024 that it would cease its
and the de-recognition of previously recognised deferred tax
operations in Austria. The Group entered the market in 2021 and
assets, with the Group’s underlying effective tax rate in FY24 being
operated 73 Pepco stores in the country. The decision to
33.8% (FY23: 26.8%).
discontinue these operations was made as part of the Group’s
review of performance across all its markets. Austria has been
FY24
classified as a discontinued item in the accounts. In total, the
€m
Underlying Non-Underlying
Reported
Austria exit led to a non-cash loss on discontinued operations of
€48.5m, largely reflecting impairment of loans and receivables
(Loss)/profit before taxation
271
(825)
(554)
payable to other subsidiaries of the Group.
Taxation (charge)/credit
(92)
(16)
(108)
(Loss)/profit after taxation
179
(841)
(662)
Balance Sheet review
Effective tax rate
33.8%
-1.9%
-19.4%
We saw growth in core balance sheet items such as “Property,
plant and equipment”, and “Right of use assets” which are largely
driven by additions from our continued store expansion program.
FY23 (restated)
Additions totalled €205m and €403m respectively for these line
€m
Underlying Non-Underlying
Reported
items.
(Loss)/profit before taxation
214
(55)
159
On an annual basis, we are obliged to perform an impairment
Taxation (charge)/credit
(57)
7
(50)
analysis of the goodwill held on the Group’s balance sheet to
(Loss)/profit after taxation
157
(48)
108
determine if the carrying value can be recovered. As a result of
Effective tax rate
26.8%
12.3%
31.8%
the significant deterioration in Poundland’s performance, resulting
from the weak execution to Pepco-sourced clothing and GM
In our five largest operating markets of the UK, Poland, Spain,
ranges, along with slower growth prospects, increased
Romania, and Czechia, the headline rate of corporate tax is
currently 25%, 19%, 25%, 16%, and 21% respectively, with
performance in each operating territory impacting our effective
tax rate.
Group stock holding (€m) FY23–FY24
130
122
116
115
108
55
101
101
41
95
277
39
26
29
257
49
242
50
50
257
205
235
217
252
904
822
762
703
680
684
664
626
Dec 22
Mar 23
Jun 23
Sep 23
Dec 23
Mar 24
Jun 24
Sep 24
Pepco
Poundland
Dealz Poland
Inventory Days
32
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Balance Sheet review (continued)
Cash flow review
competition and a higher cost outlook in the UK following the
Pepco Group (€m)
FY24
FY23
YoY
recent budget, we have fully impaired the goodwill of €725m
Cash generated by Operations
recognised on the acquisition of Poundland. We have also
(reported)
906
732
+174
recognised an impairment of €38m relating to the Poundland
Lease payments (IFRS 16
brand as well as €13m of impairments related to fixed assets.
Payments and Interest)
(442)
(380)
(62)
Inventory increased by 10.3% to €1,235m in FY24 (FY23: €1,120m),
Tax Paid
(85)
(75)
(10)
representing an increase in stock days from 122 to 130. Stock
Net Cash from Operations
holding has increased due to continued growth in store numbers
(pre-Capex)
379
276
+103
and in bringing forward stock purchases into Q4 earlier than last
Capex
(212)
(382)
+170
year in order to ensure the Group is ready for the peak Christmas
Free Cash Flow
168
(106)
+274
trading period.
Funding and investment
activities
(164)
84
(248)
Financing
Following the issue of an inaugural Eurobond in FY23 to refinance
Net Cash Flow
3
(22)
+25
our earlier Term Loan A, there were no financing events in FY24.
Effect of exchange rate
However, we did exercise our option to extend the maturity of our
fluctuations
30
9
+21
€390m Revolving Credit Facility (RCF) by a year from April 2026 to
Cash and cash equivalents at
April 2027.
the beginning of the period
330
344
(14)
The ratings agencies maintained their corporate ratings on the
Cash and cash equivalents at
company as follows: Fitch at ‘BB’, Moody’s at ‘Ba3’ and S&P Global
the end of the period
363
330
+33
at ‘BB-‘, in line with our key peers.
Net debt (pre-IFRS 16)
256
411
(155)
As of 30 September 2024, the Group’s total gross external debt
Net debt: underlying EBITDA
(excluding lease liabilities) was €620m, and made up as follows:
(pre-IFRS 16) multiple
•
€375m 7.25% bond due 2028
(leverage)
0.5x
1.0x
(0.5x)
•
€250m Term Loan B due 2026
Current ratio
1.0
0.9
+0.1
•
Zero drawn on the Company RCF
Free cash flow improved by €274m to €168m in FY24, allowing a
•
€7m finance leases
repayment of borrowings. There was a small improvement in
working capital, with an increase in supply chain financing offset
•
Less €12m of debt issuance costs which have been capitalised
by higher year-end inventory.
Cash at 30 September 2024 was €363m, €33m higher than prior
year, partly reflecting pay down of our RCF, resulting in a net
Lease payments of €442m grew 16.2% year-on-year, reflecting the
financial debt position of €256m (FY23 €411m). Our net debt to
growth in the store portfolio.
underlying LTM EBITDA leverage ratio is as follows:
Capex was significantly lower for FY24 at €212m (FY23: €382m)
•
0.5x on a pre-IFRS 16 basis (excluding leases)
reflecting greater investment discipline along with a slower store
roll-out, fewer store refits and a focus on our core CEE markets. In
•
1.7x on an IFRS 16 basis (including leases)
FY24, capex represented 3.4% of revenues and the principal areas
This puts our leverage at the lowest level since Pepco Group’s IPO
of expenditure were as follows:
in 2021 and significantly below our covenant levels. This outturn
•
€129m was invested in opening 509 gross new stores (FY23: 806
reflects much stronger discipline and focus on cash and balance
gross new stores). This included 84 stores in the UK & ROI, 166 in
sheet management.
Poland, 160 in CEE and 99 in Western Europe. UK expansion was
Net external finance expenses increased from €80m in FY23 to
largely driven by the opening of a number of stores obtained
€109m in FY24. Of this, non-lease related interest costs increased
via the collapse of Wilko.
by €12m to €32m, an effective interest rate of 6.85%.
•
€40m was invested in store refit programmes.
•
€22m was invested in IT.
•
€12m was invested in supply chain infrastructure principally
relating to the opening of a new DC in Spain.
•
The remaining €9m investment relates to maintenance capex,
largely store upkeep.
Neil Galloway
Chief Financial Officer
20 December 2024
33
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Sustainability
Our ESG strategy
Introduction:
Launching our new 2030 ESG strategy:
In today’s world, customers, employees, and investors increasingly
As we navigate the evolving landscape of global business, the
expect businesses to contribute positively to society and the
urgency of addressing environmental and social challenges such
environment. At Pepco Group, we understand the importance of
as climate change or social inequity is very clear. At Pepco Group,
sustainable business practices. This report highlights our ongoing
we recognise that the path to long-term success lies in our ability
efforts to integrate sustainability into every aspect of our operations
to innovate and adapt to these challenges. That’s why we have
– from reducing our environmental footprint, to ensuring fair and
developed a new sustainability strategy, representing a bold step
safe working conditions, and maintaining strong governance
forward in our commitment to building a more sustainable and
practices. We are building a retail business that not only meets
equitable future. It is designed to integrate social responsibility
the needs of today but also contributes to a more sustainable
and environmental sustainability deeply into every facet of our
and equitable future for all. Our focus is on providing value to our
operations, from how we source products, how we operate and
customers, driving sustainability into every price point and product
how we engage with customers and communities. Our approach
offering. We believe in the democratisation of sustainability – so
is guided by three core pillars: Planet, People and Product, each
everyone can participate in protecting the planet and supporting
of which is underpinned by specific, measurable goals that align
decent working conditions – no matter the size of their budget.
with global sustainability standards and disclosure requirements.
Our 2030 ESG strategy will deliver our mission to demonstrate that
We report our ESG progress on an annual basis. This ESG
price is not a barrier to sustainable and ethically
report covers the 12-month period from 1 October 2023 to
produced products.
30 September 2024. The organisational structure of Pepco Group
comprises the following: Pepco, Dealz, Poundland, PGS. Following
In FY24, the Board approved this new five-year ESG strategy
the introduction of the EU Corporate Sustainability Reporting
(2025-2030) which applies across the whole Group. The three
Directive (CSRD), Pepco Group will be required to report according
core pillars enable us to map better to material topics identified
to the European Sustainability Reporting Standards (ESRS) for the
by stakeholders through double materiality assessments. The
first full financial year data set after January 2024. Due to Pepco
timing for launching a new strategy works well – our UK business,
Group’s financial year, that means our first report will follow the
Poundland, concluded its previous five-year sustainability action
close of our FY25 financial year (1 October 2024-30 September
plan (2019-2024) this year.
2025). We will complete an EFRAG-aligned Double Materiality
The strategy simplifies our previous strategy while maintaining
Assessment in Q1 FY25 and assure the process as preparation
the same key aspects:
for our CSRD disclosure in 2025. As part of our transition to a
low-carbon economy, we include our annual EU Taxonomy report
New 2030 strategy
Previous strategy
in this report Our climate-related financial disclosures started
Planet
Greener environment
with our UK operating company, Poundland, in 2023. Further
detailed information on the internal processes and programmes
People
Exceptional employer
that we have developed to manage our impacts (and those on us)
Most valued supply chain
can be found in the ESG section of our website.
Stronger society
We welcome stakeholder feedback on our ESG reporting –
Product
Better products
please contact investorrelations@pepcogroup.eu.
Underpinned by strong governance Resilient business
Planet
People
Product
Reduce our
Develop our
carbon footprint
people
Use responsibly sourced
materials in products
Use less materials
Care for our
colleagues
Minimise waste
34
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Revised targets:
To align with the EU CSRD requirements, we have established the following targets to measure progress against our strategy. The targets
were developed with senior leaders and key functional groups within the business and then approved by the Group Executive Committee
and the Board.
In each case the targets:
•
align to our new 2030 five-year strategy (Planet, People and Product);
•
align to material topics which will be assessed in early FY25 in an ESRS-aligned Double Materiality Assessment (DMA);
•
align to CSRD reporting requirements; and
•
use FY24 as the baseline against which we will measure future progress.
The table shows how we map strategy across targets, KPIs, materiality and future CSRD disclosures. The definitions and baselines of
each target are described in the subsequent sections of this report.
Planet targets
KPIs
Link to FY23 material topic
Related CSRD ESRS topical standards
Reduce scope 1 and 2
Scope 1 and 2 emissions
Climate and
carbon emissions by 50%
emissions
by 2030
Standard E1: climate change
Reduce supply chain carbon
Scope 3 emissions
Responsible supply
emissions by 25% by 2035
chain (environment)
100% of own-brand product
% of product packaging that
Waste and
Standard E5: resources
packaging designed for
is recyclable
packaging
and circularity
circularity by 2030
% reduction product
Waste and
Standard E5: resources
packaging intensity
packaging
and circularity
Reduce operational waste
Tonnes of operational waste
Waste and
Standard E5: resources
by 20% by 2030
packaging
and circularity
People targets
100% of employees can
Engagement survey score
participate in feedback
channels by 2030
Employment
Standard S1: own workforce
40% women in senior
% of women in top three
positions by 2030
leadership levels
100% Pepco own-brand
% of own-label products
Responsible supply
Standard S2: value chain workers
products are ethically
made in Category 1, 2 and 3
chain (social)
sourced by 2030
factories by 2030
Product target
Increase responsibly sourced
% of certified cotton in
Responsible supply
Standard E5: resources
materials to at least 30% in
own-brand range by 2030
chain (environment)
and circularity
own-brand products by 2030
35
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Sustainability continued
Planet – Environment
Pepco Group is committed to minimising our environmental impact and advancing sustainability
across our operations. We have embedded environmental stewardship into our business practices and
decision-making processes. In this section, we outline our approach to environmental sustainability
through our strategic pillar, Planet. We recognise that addressing environmental challenges requires us
to not only reduce our own footprint but also to work collaboratively with our stakeholders, including
suppliers, customers, and communities.
Planet strategic pillar:
Priorities
Associations and accreditations
SDGs
•
Reduce our carbon footprint
•
Responsible Business Forum Poland
•
Use less materials
•
Forestry Stewardship Council (FSC)
•
Minimise waste
•
PEFC – Programme for the Endorsement
of Forest Certification
•
Oeko-tex® Standard 100 – certification
for textile product safety including
Policies
organic cotton
•
Pepco Group Environment Policy
•
Pepco Group Packaging Policy
Our activities generate greenhouse gas (GHG) emissions
The significant increase in absolute emissions from FY23 to FY24
through our operations (stores, warehousing and shipping),
is due to a number of factors, several of which are one-off actions
products and product packaging. We are committed to
in FY24:
minimising the environmental impact involved in the
•
We continue to improve and extend our carbon reporting. We
manufacturing, transportation, storage and consumption of
have closed several reporting gaps from FY23 to include less
the products we sell.
estimations and more actual data, for example the employee
As part of our new 2030 ESG strategy, we have set new
car fleet in Pepco and Dealz Poland store heating emissions.
Group-wide goals against which we will measure progress. In
•
For several months in FY24, our new Spanish distribution centre
this first year of Scope 3 baseline calculation, we have used
was generating electricity from on-site diesel generators while
transaction data to get a spend analysis and identify hotspots.
waiting for connection to the national grid, resulting in much
The data comes from supplier invoices and covers purchased
higher emissions than expected from 76,364 litres of diesel.
products and services, capital goods, upstream transport and
Going forward, all our Spanish operations (office, stores and
distribution, and business travel. Moving forward, we will collect
DC) will source renewable electricity.
actual carbon data from key suppliers (starting with top annual
spend) which will provide an increasingly accurate picture of
•
In FY24, Poundland took over 61 stores from Wilko. These stores
progress against our goals.
had a non-renewable gas energy contract and increased
Poundland’s scope 1 stationary combustion carbon emissions
by 270% from FY23. Scope 1 emissions from diesel transport also
Reducing our carbon footprint
increased due to the increase in store footprint.
In FY24, we have established baselines for Pepco Group across
scopes 1, 2 and 3.
•
More stores were opened in high carbon-emitting countries:
50% of net new store openings were in Poland, Czechia, Serbia
% of total
and Bosnia. The electricity in these countries is predominantly
Tonnes CO2e
emissions
generated from coal which has a carbon emission factor of
Scope 1
20,477
1%
0.806 tCO2e vs natural gas (Italy: 0.455 tCO2e) or renewable
electricity (Spain: 0.134 tCO2e).
Scope 2
129,099
4%
Scope 3
2,944,536
95%
% change
FY24: absolute and intensity results scope 1 and 2
FY22
FY23
FY24
FY23-FY24
Absolute tCO2e
106,214
101,674
149,600
+ 32%
Intensity tCO2e/€m turnover
22.0
18.0
24.0
+ 25%
36
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
We have established the following absolute GHG emissions reduction goals which have been approved by both the Executive Committee
and the Board:
1. Reduce scope 1 and 2 carbon emissions by 50% by 2030 (against a FY24 baseline).
2. Reduce supply chain carbon emissions by 25% by 2035 (against a FY24 baseline).
These goals form interim targets for our net zero strategy as described in the next section. Progress against the goal on Scope 1 and 2
emissions reduction forms part of the 10% ESG element of the Executive LTIP performance conditions.
Net zero strategy
The Pepco Group net zero strategy was agreed by our Board and senior business leaders early in 2024. Our long-term ambition is to
reach net zero as defined by the Science-Based Targets Initiative (SBTi). The SBTi’s Corporate Net Zero Standard enables companies to
set robust and credible net zero targets in line with a 1.5°C future. Net zero focuses on reducing GHG emissions as much as possible
before neutralising any emissions that cannot be avoided using permanent carbon dioxide removals.
Pepco Group net zero goals
Scope 1
Net zero 2035
Scope 2
Net zero 2040
Net zero 2050
Scope 3
Net zero 2050
Progress against these long-term goals is supported by the ESG 2030 strategy carbon emissions interim goals described above. The
table below describes how we intend to reach net zero interim and long-term goals. Further details will be described in our Climate
Transition fact sheet available in the ESG section on our website.
Pepco Group net zero carbon transition action plan
1. Emission reduction targets:
8. Reporting and transparency:
Pepco Group commits to ambitious and science-based
Pepco Group is committed to transparently reporting its
emission reduction targets encompassing scope 1, scope 2,
progress toward net zero goals. This includes regular disclosure
and scope 3 emissions.
of emission data, progress against targets, and the impact of
sustainability initiatives.
Targets will be set in accordance with the latest climate science
and will be regularly reviewed to ensure alignment with global
9. Offset and removal strategies:
efforts to limit temperature rise.
Where emissions cannot be eliminated by other means, Pepco
2. Renewable energy adoption:
Group will invest in high-quality carbon offset projects and
explore carbon capture technologies.
Pepco Group will transition to 100% renewable energy for its
operations. This involves investing in on-site renewable energy
projects, purchasing Renewable Energy Certificates (RECs), and
Resources and circularity
exploring Power Purchase Agreements (PPAs) for renewable
Beyond GHG emissions, the Planet pillar within our 2030 strategy
energy sources.
sets targets with regard to packaging and waste as part of our
priorities to use less materials and reduce waste, contributing to
3. Energy efficiency measures:
a low-carbon circular economy.
Implementation of energy-efficient technologies and practices
At Pepco Group we focus on reducing resource consumption
to reduce overall energy consumption. Regular assessments will
by designing our own-brand product packaging for circularity and
be conducted to identify emerging efficiency solutions.
minimising weight. We define “packaging designed for circularity”
as packaging that is designed to be easily reused, recycled, or
4. Supply chain engagement:
composted to ensure that materials are kept in use for as long as
possible. We emphasise the use of fewer resources by setting a
Collaborative efforts with suppliers to set emission reduction
goal to reduce packaging weight and volume while maintaining
targets and promote sustainable practices.
product protection and usability. In addition, we request recycled
5. Innovation and research:
content in our product specifications and use standard labelling to
indicate how and which materials can be easily recycled by
Partnering in research and development to explore and adopt
consumers.
innovative technologies that contribute to emissions reduction.
Our revised packaging goals are designed to be more
specific and measurable and will enable us to track progress
6. Circular economy practices:
more effectively:
Integration of circular economy principles into product design,
1. 100% of own-brand product packaging is designed for
manufacturing, and end-of-life management to minimise waste
circularity by 2030
and reduce environmental impact.
2. 20% reduction in product packaging intensity by 2030.
7. Employee and stakeholder engagement:
Inclusive programmes to educate and engage employees,
customers, and other stakeholders in sustainable practices.
Regular communication will keep all stakeholders informed
about our progress and goals.
37
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Sustainability continued
Planet – Environment continued
For the period under review, activities which contribute to one or
more of the following six environmental objectives are in scope
for reporting: (i) climate change mitigation; (ii) climate change
Resources and circularity continued
adaptation; (iii) Sustainable use and protection of water and
marine resources; (iv) Transition to a circular economy; (v) Pollution
Baseline
prevention and control; and (vi) Protection and restoration of
Goal
KPI
FY23
FY24
biodiversity and ecosystems.
100% of own-brand1 % of packaging that New goal
99.4%
packaging
is reusable,
in FY24
Approach
designed for
recyclable or
In order to present the required KPI disclosures we have assessed
circularity by 2030 compostable
our activities in terms of Taxonomy eligibility and Taxonomy
% reduction
New goal
0.053 kg/
alignment under the following methodology:
packaging intensity
in FY24
unit sold
•
Step 1: Identify activities eligible under the Taxonomy
(Taxonomy-eligible activities) – as in the previous year, all
1
Own-brand is defined as products offered to consumers under the Pepco,
Poundland and Dealz brands, and manufactured by selected suppliers with
activities listed in the Taxonomy were analysed in terms of
design, qualities and packaging specified by Pepco Group.
revenue, capex and opex
Our FY24 baseline for recyclable own-brand packaging is already
•
Step 2: Identify activities that are eligible and aligned under
high. The goal will ensure that we maintain this performance and
the Taxonomy (Taxonomy aligned activities) – review eligible
focus on recyclable materials in our own-brand packaging. We
activities against the Taxonomy’s substantial contribution
will therefore concentrate our efforts on reducing the overall
criteria and “do no significant harm” (DNSH) principle to assess
amount of packaging around our own-brand products. The
whether the activity meets the technical screening criteria.
combination of the two goals will bring attention to the reduction
Activities are aligned to one of the six environmental objectives as
of packaging weight, while discouraging any regrettable
outlined above, ensuring no double counting between objectives.
substitutions with lightweight, but difficult to recycle materials.
The following accounting principles have been applied to
Waste
determine turnover, opex and capex KPIs relevant to the
The Group’s activity generates waste through both products and
Taxonomy disclosures:
product packaging in the supply chain, in store, distribution and
•
Turnover: total turnover corresponds to net sales in the
office operations and through waste in customer households.
consolidated income statement in the financial report.
As part of our 2030 ESG strategy, we have a new, Group-wide
For further information about turnover, please see the Group’s
goal for operational (store, distribution and office) waste
income statement in this report.
reduction.
•
Capex: covers additions to tangible and intangible assets
during the financial year considered before depreciation,
Baseline
amortisation and any re-measurements, including those
Goal
KPI
FY24
resulting from revaluations and impairments, for the relevant
By 2030, reduce operational
Tonnes of
115,291
financial year and excluding fair value changes. The
waste by 20% by 2030 from
operational
tonnes
denominator shall also cover additions to tangible and
a FY24 baseline
waste
intangible assets resulting from business combinations.
•
Opex: covers direct non-capitalised costs that relate to
EU Taxonomy
research and development, building renovation measures,
The EU Taxonomy is a classification system that defines criteria
short-term lease, maintenance and repair, and any other direct
for economic activities that are aligned with a net zero trajectory
expenditures relating to the day-to-day servicing of assets of
by 2050 and the broader environmental goals other than climate.
property, plant and equipment by the undertaking or third
Under the Taxonomy, economic activities that qualify as
party to whom activities are outsourced that are necessary to
environmentally sustainable are those that: (i) contribute
ensure the continued and effective functioning of such assets
substantially to any one of six environmental objectives using
science-based criteria; (ii) cause no significant harm to any of
the other environmental objectives; (iii) ensure compliance with
minimum social safeguards; and (iv) meet the technical eligibility
screening criteria that have been set by the Commission.
Companies must disclose specific KPIs – turnover, capital
expenditure (capex) and operating expenditure (opex) –
which indicate the portion of their economic activities which
are environmentally sustainable.
38
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Eligibility assessment
Our contribution to environmentally
Following a review of activities listed in the Taxonomy, it was
sustainable activities
concluded that the main revenue-generating activity of the
We have concluded that our main activity (retail of FMCG, GM and
Pepco Group – retail of FMCG, GM and apparel goods – is not
apparel goods) is not in the activities listed in the Taxonomy, and
included in the taxonomy activities and is therefore out of scope.
consequently our Taxonomy-eligible turnover and opex is 0% and
As a result 0% eligible turnover is reported for this activity and
Taxonomy-eligible capex is 3%, falling from 4% in FY23, reflecting
eligible capex and opex related to this activity is also 0%.
lower spend on energy efficient infrastructure as store upgrade
programmes for LED lighting in Pepco and air conditioning unit
However, capex and opex spend on activities related to the
installation in Poundland tail-off as an increasing proportion of
purchase of output from taxonomy-eligible economic activities
the store portfolio has been upgraded over time. Taxonomy-
that support our core activity was identified. This capex spend
eligible opex of 0% is in line with the previous year.
relates to the following categories:
We believe our commitment to conducting business in an
•
7.3 Installation, maintenance and repair of energy efficiency
environmentally sustainable way, as described in this section,
equipment – installation and replacement of energy efficient
enables the Group to make a broader contribution to the EU’s
air conditioning units in Poundland stores and installation of
environmentally sustainable objectives. It should be noted that
energy efficient LED lighting in Pepco and Poundland stores.
the Taxonomy is subject to periodic revisions, which in the future
•
7.4 Installation, maintenance and repair of charging stations
may define a separate category and specific technical
for electric vehicles in buildings (and parking spaces attached
qualification criteria for activities. For the time being, the Group
to buildings) - installation of electric vehicle charging points at
has provided the appropriate disclosures in relation to its
our Poundland head office and warehouse sites.
supporting activities that are included in the Taxonomy.
•
7.5 Installation, maintenance and repair of instruments and
In order to ensure compliance with Taxonomy reporting
devices for measuring, regulation and controlling energy
requirements in the future, we will continue to monitor updates to
performance of buildings – installation of smart meters and
the existing regulation and inclusion of new economic activities as
other building and equipment management systems which
well as reviewing our approach to climate risk assessments in
improve energy efficiency.
order to meet the DNSH criteria.
The percentage of eligible capex is calculated by dividing the
We will continue to review the way in which information is
Taxonomy-eligible capex by total capex as described above.
classified and organised by Group companies in our finance and
The percentage of eligible opex is calculated by dividing the
IT systems. We will also identify opportunities for improvement in
Taxonomy-eligible opex by total opex as described above.
collecting and managing information to enable better reporting in
the future.
Alignment assessment
For an activity to be taxonomy-aligned, it must meet three
conditions (i) Substantially contribute to at least one of the six
environmental objectives outlined above, by meeting the
Taxonomy’s technical criteria; (ii) Do No Significant Harm (DNSH) to
any of the other environmental objectives and (iii) comply with
minimum social and governance safeguards, such as human
rights, labour rights, and anti-bribery regulations.
In order to meet the DNSH criteria companies must complete a
climate risk assessment. The Group has not completed a climate
risk assessment in line with the Taxonomy’s DNSH criteria. It is
therefore not possible to conclude that any Taxonomy-eligible
activities meet the alignment criteria and therefore Taxonomy-
aligned turnover, opex and capex is 0%.
The KPIs required to be reported under the Taxonomy are set out
in the tables on the following pages.
39
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Sustainability continued
Planet – Environment continued
Taxonomy KPIs
Substantial
TURNOVER
Contribution Criteria
DNSH criteria
Y; N; Y; N; Y; N; Y; N; Y; N; Y; N;
EUR m
%
Y/N Y/N Y/N Y/N Y/N Y/N Y/N
%
E
T
N/EL N/EL N/EL N/EL N/EL N/EL
A. Taxonomy eligible activities
A.1 Environmentally sustainable activities (Taxonomy-aligned)
N/A
N/A
Nil
0% N/EL N/EL N/EL N/EL N/EL N/EL
N
N
N
N
N
N
N
0%
—
—
A.1 Turnover of environmentally sustainable
activities (Taxonomy-aligned)
N/A
Nil
0% 0% 0% 0% 0% 0% 0%
N
N
N
N
N
N
N
0%
—
—
A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)
N/A
N/A
Nil
0% N/EL N/EL N/EL N/EL N/EL N/EL
A.2 Turnover of Taxonomy-eligible but not environmentally
sustainable activities (not Taxonomy-aligned activities)
Nil
0% 0% 0% 0% 0% 0% 0%
0%
Total (A.1+A.2)
Nil
0% 0% 0% 0% 0% 0% 0%
0%
B. Taxonomy non-eligible activities
Turnover of Taxonomy non-eligible activities
6,166.7 100%
Total (A+B)
6,1667 100%
Proportion of Taxonomy turnover/total turnover1
Taxonomy
Taxonomy
aligned
eligible
CCM
0%
0%
CCA
0%
0%
WTR
0%
0%
CE
0%
0%
PPC
0%
0%
BIO
0%
0%
1
The following abbreviations have been used in the table above: Climate Change Mitigation (CCM); Climate Change Adaptation (CCA);
Water and Marine resources (WTR); Circular Economy (CE); Pollution Prevention and Control (PPC); Biodiversity and Ecosystems (BIO).
40
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Criteria for
CAPEX
significant contribution
DNSH Criteria
Y; N; Y; N; Y; N; Y; N; Y; N; Y; N;
EUR m
%
Y/N Y/N Y/N Y/N Y/N Y/N Y/N
%
E
T
N/EL N/EL N/EL N/EL N/EL N/EL
A. Taxonomy eligible activities
A.1 Environmentally sustainable activities (Taxonomy-aligned)
N/A
N/A
Nil
0% N/EL N/EL N/EL N/EL N/EL N/EL
N
N
N
N
N
N
N
0%
—
—
A.1 Capex of environmentally sustainable activities
(Taxonomy-aligned)
Nil
0% 0% 0% 0% 0% 0% 0%
N
N
N
N
N
N
N
0%
—
—
A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)
Installation, maintenance and repair of energy
efficiency equipment
7.3
6.1
3% EL N/EL N/EL N/EL N/EL N/EL
Installation, maintenance and repair of instruments
and devices for measuring, regulation and
controlling energy performance of buildings
7.5
0.4
0% EL N/EL N/EL N/EL N/EL N/EL
A.2 Capex of Taxonomy-eligible but not
environmentally sustainable activities
(not Taxonomy-aligned activities)
6.5
3% 3% 0% 0% 0% 0% 0%
4%
Total (A.1+A.2)
6.5
3% 3% 0% 0% 0% 0% 0%
4%
B. Taxonomy non-eligible activities
Capex of Taxonomy non-eligible activities
205.2 97%
Total (A+B)
211.7 100%
Proportion of capex turnover/total capex1
Taxonomy
Taxonomy
aligned
eligible
CCM
0%
3%
CCA
0%
0%
WTR
0%
0%
CE
0%
0%
PPC
0%
0%
BIO
0%
0%
1
The following abbreviations have been used in the table above: Climate Change Mitigation (CCM); Climate Change Adaptation (CCA);
Water and Marine resources (WTR); Circular Economy (CE); Pollution Prevention and Control (PPC); Biodiversity and Ecosystems (BIO).
41
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Sustainability continued
Planet – Environment continued
Taxonomy KPIs continued
Substantial
OPEX
Contribution Criteria
DNSH criteria
Y; N; Y; N; Y; N; Y; N; Y; N; Y; N;
EUR m
%
Y/N Y/N Y/N Y/N Y/N Y/N Y/N
%
E
T
N/EL N/EL N/EL N/EL N/EL N/EL
A. Taxonomy eligible activities
A.1 Environmentally sustainable activities (Taxonomy-aligned)
N/A
N/A
Nil
0% N/EL N/EL N/EL N/EL N/EL N/EL
N
N
N
N
N
N
N
0%
—
—
A.1 Opex of environmentally sustainable activities
(Taxonomy-aligned)
Nil
0% 0% 0% 0% 0% 0% 0%
N
N
N
N
N
N
N
0%
—
—
A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)
Installation, maintenance and repair of energy
efficiency equipment
7.3
0.1
0% EL N/EL N/EL N/EL N/EL N/EL
Installation, maintenance and repair of instruments
and devices for measuring, regulation and
controlling energy performance of buildings
7.5
0.2
0% EL N/EL N/EL N/EL N/EL N/EL
A.2 Opex of Taxonomy-eligible but not
environmentally sustainable activities
(not Taxonomy-aligned activities)
0.4
0% 0% 0% 0% 0% 0% 0%
0%
Total (A.1+A.2)
0.4
0% 0% 0% 0% 0% 0% 0%
0%
B. Taxonomy non-eligible activities
Opex of Taxonomy non-eligible activities
2,371.4 100%
Total (A+B)
2,371.8 100%
Proportion of Taxonomy opex/total opex1
Taxonomy
Taxonomy
aligned
eligible
CCM
0%
0%
CCA
0%
0%
WTR
0%
0%
CE
0%
0%
PPC
0%
0%
BIO
0%
0%
1
The following abbreviations have been used in the table above: Climate Change Mitigation (CCM); Climate Change Adaptation (CCA);
Water and Marine resources (WTR); Circular Economy (CE); Pollution Prevention and Control (PPC); Biodiversity and Ecosystems (BIO).
42
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Nuclear and fossil gas-related activities
Nuclear energy-related activities
The undertaking carries out, funds or has exposures to research, development, demonstration and deployment of innovative electricity generation
No
facilities that produce energy from nuclear processes with minimal waste from the fuel cycle.
The undertaking carries out, funds or has exposures to construction and safe operation of new nuclear installations to produce electricity or process
No
heat, including for the purposes of district heating or industrial processes such as hydrogen production, as well as their safety upgrades, using best
available technologies.
The undertaking carries out, funds or has exposures to safe operation of existing nuclear installations that produce electricity or process heat, including
No
for the purposes of district heating or industrial processes such as hydrogen production from nuclear energy, as well as their safety upgrades.
Fossil gas-related activities
The undertaking carries out, funds or has exposures to construction or operation of electricity generation facilities that produce electricity using fossil
No
gaseous fuels.
The undertaking carries out, funds or has exposures to construction, refurbishment, and operation of combined heat/cool and power generation
No
facilities using fossil gaseous fuels.
The undertaking carries out, funds or has exposures to construction, refurbishment and operation of heat generation facilities that produce heat/cool
No
using fossil gaseous fuels.
Article 8 (6), (7) and (8) of the Delegated Regulation 2022/1214 obliges non-financial undertakings to make relevant disclosures concerning their nuclear and
fossil gas related activities. To meet this obligation, the Group presents the necessary information in the table above, including its turnover, capex and opex
KPIs for nuclear and fossil gas related activities. The Group is not exposed to nuclear and fossil gas-related activities and therefore does not include any
additional data.
43
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Sustainability continued
People – Social
Pepco Group is a multinational company operating across a wide range of geographies and jurisdictions.
Strong business ethics and accompanying policies help to maintain responsible practices, protect human
rights across the Group and value chain and uphold our reputation with our stakeholders. We are aware
of the potential impact that any breach of ethical standards could have on the wellbeing and livelihoods
of both our own employees and the people within our supply chain.
People strategic pillar
Priorities
Policies
SDGs
•
•
Develop our people
Anti-Bribery and Corruption
•
Care for our colleagues
•
Supplier Code of Conduct
•
Pepco Group Human Rights policy
•
Child Labour Remediation policy
Associations and
•
Factory Audit policies
accreditations
•
Whistle Blowing policy
•
Ethical Trading Initiative aligned
•
SEDEX: global data platform for
supply chain assessment
As part of our 2030 ESG strategy, we have established new goals and baselines to disclose and measure progress:
Progress/
Goals
KPIs
FY23
Baseline FY24
100% of employees can participate in
Engagement survey score
Poundland only:
Pepco, PGS and
feedback channels by 2030
78% response rate
Group only:
88% response rate
40% women in senior positions by 2030
% of women at top three leadership levels2
New goal in FY24
28%
100% of Pepco own-brand1 products are % of own-label products made in Category 1, 2
New goal in FY24
97%
ethically sourced by 2030
and 3 factories3
Perform annual audit of our factories
% of factories audited against our audit plan4
100%
100%
These new goals address our key intentions to effectively engage with employees, to promote diversity and inclusion in our Group and
to ensure that we uphold and extend ethical standards across our supply chain.
1
Own-brand products = products offered to consumers under the Pepco, Poundland and Dealz brands, and manufactured by selected suppliers with design, qualities
and packaging specified by Pepco Group.
2
Top three leadership levels = business leaders at Group level: CEO, CEO-1 and CEO-2 plus operating company management teams.
3
Category 1, 2 and 3 factories are defined as having no-risk to medium-risk issues and are approved for new business with Pepco Group. Business restrictions are
imposed on factories with Category 4 and 5 grading for having high-risk or critical issues. Factories need to submit a Corrective Action Plan for all high-risk issues
identified during the audit.
4
Defined as the percentage of social and ethical audits completed by our Group sourcing compliance team against the annual audit plan.
44
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Own workforce
As a large retail organisation with 47,760 colleagues in direct operations across 20 countries, we recognise the essential role our people
play in driving growth. We are committed to creating an environment where everyone feels valued, supported, and empowered to
achieve their best. We actively encourage internal career progression and personal development. Our commitment spans the entire
Group, ensuring all colleagues, regardless of role or location, benefit from competitive pay, career opportunities, inclusive policies, and
effective engagement. In FY24, we have extended our reporting capabilities in preparation for CSRD ESRS S1 disclosures in FY25.
Employees
FY24
Female
Male
Total
Employed for a definite period of time
9,577
690
10,267
Employed indefinitely
29,836
7,657
37,493
Number of employees, by type of employment:
Full time
25,311
4,151
29,462
Part-time
14,102
4,196
18,298
39,413
8,347
47,760
New employee hires and employee turnover
FY24
Number of new
Rate of new
employee hires
employee hires
Number of new employee hires (permanent employees only)
11,899
59%
FY24
Rate of employee
Total number of employee turnover (per person) by:
Number of leavers
turnover
Voluntary
11,152
23%
13,621
28%
Involuntary1
Total
24,773
52%
1
Involuntary leavers include: redundancy/termination by company/end of fixed term employment.
Employee training and development:
We invest in colleague training and development providing mandatory, induction and development training to our people at least on
an annual basis through our regional training centres. Additionally, we use tablets in stores to offer more e-learning options. A key focus
has been on improving internal career pathways to retain the best talent; the table below summarises promotions across the Group.
Average training hours per year per employee
FY24
Average number of training hours per criterion
Mandatory training
Induction training
Development
e-learning
0.9
1.3
0.2
Classroom
4.4
11.8
2.5
Overall average number of training hours
5.3
13.1
2.7
Promotions
FY24
Female
Male
Poundland
681
332
1,627
71
Pepco
Dealz
285
35
PGS
12
0
Group
2
3
Total
2,607
441
3,048
45
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Sustainability continued
People – Social continued
Employee engagement:
At Pepco Group, we have a wide range of channels to facilitate effective employee engagement, including feedback surveys, internal
communication platforms, regular meetings, regional road shows and town halls. These provide us with the opportunity to share business
performance, achievements and progress. Our ESG 2030 strategy goal is for 100% of employees to be able to participate in feedback
channels by 2030. In FY24, we extended our employee survey across the whole Group and all employees have feedback channels
available to them. Employee surveys within the different operating companies are on different time scales. There was no survey for Pepco
in 2023 and while employee surveys were extended to PGS and Group employees in FY24, Poundland and Dealz closed their surveys after
year end, and those results are excluded from the FY24 report.
Employee engagement
Survey response rate %
Engagement score %1
FY23
FY24
FY23
FY24
Poundland
78%
n/a
74%
n/a
Pepco
n/a
75%
n/a
54%
Dealz
n/a
n/a
n/a
n/a
PGS
n/a
94%
n/a
84%
Group
n/a
94%
n/a
63%
Average
88%
67%
1
Engagement is defined as the level at which employees commit their energy and effort to contribute to the Company’s success.
Diversity and inclusion
We remain focused on diversity, equality, and inclusion, regularly reviewing data from recruitment processes and feedback gathered
through our annual surveys. Colleagues are empowered to be “champions” and can participate in various focus groups.
We have established a goal to drive improved representation of females in leadership positions. Our goal is to achieve 40% women in
senior positions by 2030. We define senior positions as business leaders at Group-level CEO, CEO minus 1 and CEO minus 2, plus
operating company management teams.
Senior leadership gender split
As at 30 September 2024
Female
Male
Total
Female %
CEO
0
1
1
0%
CEO – 1
0
5
5
0%
CEO – 2
4
7
11
36%
Dealz Management
4
4
8
50%
Pepco Management
3
4
7
43%
0
7
7
0%
Poundland Management
Total
11
28
39
28%
Diversity of governance bodies and employees
Percentage of employees from each category compared
Percentage of Executive Committee
Percentage of Group Board members by
to the total number of employees in the organisation
members by age and gender
age and gender
FY24
Female
Male
Total
Female
Male
Total
Female
Male
Total
80%
20%
14,509
0%
0%
—
0%
0%
—
Aged <30
84%
16%
26,910
0%
100%
3
0%
0%
—
Aged 30-50
Aged >50
81%
19%
6,333
50%
50%
2
29%
71%
7
Total %
by gender
83%
17%
47,752
20%
80%
5
29%
71%
7
For FY24, our improved HR data and systems means that we can disclose gender pay gap by the country that we operate in. There are
significant national variations influenced by local employment and hiring norms and the distribution of roles, with many women in store
positions. We are committed to fair treatment and career support for all employees. Store positions, our largest employee group, follow
standardised pay rates. We use grading and market benchmarks for other roles to ensure fair pay practices.
46
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Supply chain workforce
Gender pay gap1
We work with our suppliers to develop sustainable and ethically
Mean
sourced product options which meet our customers’ preferences
Country
FY23
FY24
Difference
at an affordable price point. Our vertically integrated supply
Bangladesh
19%
37%
18.3%
chain enables better oversight and influence over the ethical and
Bulgaria
34%
30%
-4.4%
environmental management practices of our partners and
-2%
China
4%
-5.7%
therefore facilitates a higher level of risk mitigation. Our FMCG
Czechia
29%
28%
-1.2%
products are sourced directly from both domestic and
international suppliers including some of the world’s biggest
Germany
44%
35%
-9.3%
brands. More details of our Supply Chain Human Rights approach
Estonia2
-8%
0%
-
and programmes can be found in the ESG section of our website.
Spain
18%
19%
1.4%
Greece
22%
24%
2.4%
We have strong policies in place to protect the integrity of our
supply chain, including a Pepco Group Supplier Code of Conduct
Hong Kong
28%
27%
-1.3%
which applies to all suppliers and contractors. The Code of
Croatia
58%
55%
-3.3%
Conduct is aligned with the Ethical Trading Initiative (ETI) Base
Hungary
17%
17%
0.4%
Code, an internationally recognised code of labour practice
Ireland
6%
3%
-3.1%
founded on the conventions of the International Labour
India
-9%
-24%
-14.9%
Organisation (ILO). It includes expectations concerning human
Italy
18%
15%
-2.9%
rights (with specific reference to child labour), ensures colleagues
Lithuania
67%
77%
10.1%
in factories are treated fairly, and lays out our position on bribery,
transparency and unauthorised subcontracting as well as
Latvia
43%
33%
-9.6%
environmental provisions. In FY24, we have further extended our
Poland
45%
46%
-0.8%
policies with regard to the protection of human rights within our
Portugal
22%
17%
-5.0%
supply chain, these can be found in the Pepco Group Compliance
Romania
40%
43%
3.3%
Policies Manual published on our website.
Serbia
38%
33%
-4.8%
We have also established a new ethical sourcing goal to
Slovenia
29%
29%
-0.4%
complement our previous ethical audit goal. Over the last few
Slovakia
21%
44%
23.2%
years, we have disclosed the percentage of ethical audits across
United Kingdom
13%
9%
-3.7%
all our supplier factories. We will retain this goal as it is linked to
the 10% ESG element of the Executive remuneration and is
1
ESRS S1-16: the male-female pay gap, defined as the difference between
important to maintain focus on this key programme. We also
average gross hourly earnings of male paid employees and of female paid
wanted to be able to demonstrate the progress and outcomes
employees expressed as a percentage of average gross hourly earnings of
male paid employees.
that our audit programme is driving with suppliers, therefore we
2
Estonia – zero male employees.
have established a new goal related to showing the percentage
of low-risk/high-performing suppliers against our ethical
At Pepco Group, employees can report discrimination or
standards.
harassment through a dedicated procedure. During FY24, we
launched a new, independent reporting process which facilitates
Progress/
confidential reporting, and have taken steps to raise awareness of
Goals
KPIs
Progress FY23
Baseline FY24
the procedure amongst our colleagues. 99 cases of discrimination
were reported, compared to 0 in FY23, which demonstrates to us
100% of
% of own-label
New goal
97.4%
that the system is working better than previously.
Pepco
products made
in FY24
own-brand1
in Category 1,2,
Discrimination cases (September 2023-August 2024)
products are and 3 factories2
ethically
Number of cases during period
sourced by
FY23
FY24
2027
Poundland
—
87
Perform
% of factories
100%
100%
Pepco
—
12
annual audit audited against
Dealz
—
0
of our
our audit plan3
PGS
—
0
factories
Group
—
0
1
Own-brand products are defined as products offered to consumers under the
Total
0
99
Pepco, Poundland and Dealz brands, and manufactured by selected suppliers
with design, qualities and packaging specified by Pepco Group.
2
Category 1,2,3 factories are defined as having no-risk to medium- risk issues
and are approved for new business with Pepco Group. Business restrictions are
imposed on factories with CAT 4 and CAT 5 grading for having high-risk or
critical issues. Factories need to submit a Corrective Action Plan for all high-risk
issues identified during the audit.
3
Defined as the percentage of social and ethical audits completed by our
Group Sourcing Compliance team against the annual audit plan
47
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Sustainability continued
Product
At Pepco Group, we aim to democratise sustainability for our customers by offering affordable
choice and demonstrating that price is not a barrier to sustainable and ethically produced products.
One of the most impactful ways that we can positively contribute to our customers and communities
is through offering a larger range of affordable and sustainable products available in our stores.
Product strategic pillar
Priorities
Associations and accreditations
SDGs
•
•
Responsibly source
Better Cotton Initiative
product materials
•
SEDEX: global data platform for supply
chain assessment
•
ZDHC: Zero Discharge Hazardous
Chemicals – a collaboration platform
Policies
for textiles suppliers
•
Supplier Code of Conduct
•
Supplier Environmental Guidelines
•
Product quality specifications
As part of our new 2030 ESG strategy, we focus on responsible sourcing of materials through the Product pillar. We have set a new goal
which applies to all our own-brand textile products sourced for sale throughout the Group.
Goal
KPI
FY23
Progress FY24
Increase responsibly sourced
% of certified cotton in own-brand range
21%
26%
materials to at least 30% in
by 2030
own-brand products by 2030
100% of our suppliers are audited against our Ethical Sourcing policy and some of our materials are certified to external standards such
as the Recycled Claim Standard (RCS), the Global Recycled Standard (GRS) for recycled materials, the Organic Content Standard (OCS)
or the Global Organic Textile Standard (GOTS) for cotton, the Forest Stewardship Council for products from forestry, such as paper or
wood, or Oeko-TEX for textiles. We want to focus our efforts, and our goal, on textiles and specifically cotton as clothing forms the largest
percentage of our product mix and revenue.
Certified cotton
We have been a member of the Better Cotton Initiative (BCI) since 2022. The Better Cotton Initiative (BCI) aims to support farming
communities socially, environmentally and economically. 2.13 million farmers in 22 countries now have a licence to sell their cotton as
Better Cotton and the initiative has reached almost 4 million people whose working lives are connected to cotton production. Those
people are trained to use water efficiently, care for soil health and natural habitats, reduce use of the most harmful chemicals and
respect workers’ rights and wellbeing. The tonnage of cotton that Pepco Group sources under the BCI scheme is recorded via the BCI
membership platform each calendar year. It is independently assessed and subsequently reported, providing an external validation
of Pepco Group’s progress against this responsibly sourced material goal.
By sourcing cotton through Better Cotton, Pepco contributes to raising the standards of cotton production, which translates into the
wellbeing of farmers and the local environment.
In addition to responsibly sourced cotton, we provide our customers with a range of affordable, sustainable product options across
our clothing, general merchandise and FMCG lines including Oeko-Tex and Forest Stewardship Council (FSC) eco-certified products,
recycled polyester clothing and vegan and vegetarian ranges. We label those products accordingly, to help our customers clearly
identify more sustainable choices and show our commitment to environmentally responsible production.
48
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
ESG Governance
As a Group, we are committed to ethical business conduct, strong corporate governance,
sustainability and transparency, aligning performance with our long-term goals. We have
established governance frameworks aimed at ensuring the effective operation of our Board,
protecting stakeholder interests, maintaining business resilience and building trust.
ESG oversight and management
Pepco Group Board and Audit Committee
Reviews ESG strategies, goals and targets and monitors progress quarterly, advising the Board as appropriate
ESG Executive Committee
Chaired by the Group CFO, the ESG Executive Committee determines and aligns strategy, reviews progress and next steps
for ESG across Pepco Group
Group sustainability team
OpCo sustainability committees
Includes representatives from across the Group. It
Implement ESG action plans and roadmaps at
coordinates and reports on ESG work across the Group
operating company level, and report on progress
against agreed KPIs
Group-wide policy revision and summaries
The Group CFO oversees the Group’s ESG strategy and is
responsible for its execution, supported by senior management in
We have recently updated our policies to reflect a centralised
the operating companies and the Group’s Head of ESG. Quarterly
Group position. The policies are summarised below, and longer
ESG progress updates are presented to the Group’s Audit
descriptions can be found in the Pepco Group Policy Handbook.
Committee. The ESG Executive Committee is chaired by the Group
These revisions strengthen core principles aimed at safeguarding
CFO to align and drive ESG priorities, review progress, manage
our employees and the business, while promoting a culture of trust
risks, and develop strategies for the Group and its companies.
and integrity. Additionally, as part of our proactive approach to
maintaining a culture of transparency, ethical conduct and
Pepco, Dealz and Poundland have sustainability committees, with
compliance across the Group, employees are required to
representatives from key functions such as operations, marketing,
complete a dedicated training module based on this updated
commercial teams, finance, HR and IT/data management. The
policy suite. Our mandatory Group-wide compliance training
sustainability managers for each operating company work with
initiative and user platform was extended in FY24, focusing on
internal communications to regularly update our colleagues.
critical topics such as anti-bribery and corruption, fraud
The Group sustainability team facilitates cross-Group decision-
prevention, whistle blowing and human rights. The training is
making through consolidated reporting and drives best practice
interactive, tailored to our specific industry and business areas,
in the various business units. Our in-house sourcing business, PGS,
and aligns with the standards and principles outlined in our
and its Asia-based teams manage supplier-related ESG risks. ESG
updated Group policy suite. To ensure inclusivity and engagement
risks are monitored through the Group’s risk register (see the risk
across the Group, the courses were translated into multiple
section of this report), reported by Internal Audit and overseen by
languages. We are actively monitoring completion rates and we
the Audit Committee.
have over a 90% completion rate reported across all entities.
Additionally, we have published an annual training plan to
Business ethics and human rights
support the release of new topics, which will be subject to
As a multinational organisation operating across diverse
ongoing review and update.
geographies and jurisdictions, we remain committed to upholding
Anti-bribery and corruption
strong business ethics and we have placed a strong emphasis on
Bribery is illegal in all the countries in which we operate. It
driving further improvements, including the revision and
damages markets and communities and transfers resources into
introduction of Group-wide policies and the implementation of
new mandatory compliance training. Our enhanced policies aim
the wrong hands. Our position on bribery and corruption is clear:
to foster responsible practices, uphold human rights throughout
we do not engage in corruption, and we never request, pay,
the Group and its value chain and protect our reputation with
authorise, or solicit or accept bribes, facilitation payments or
stakeholders. We fully recognise the potential impact that any
kickbacks, regardless of local custom or practice. There were zero
breach of ethical standards could have on the wellbeing and
confirmed cases of bribery and corruption in FY24.
livelihoods of our employees, as well as those within our supply
chain, and are dedicated to mitigating these risks through
continuous improvement.
49
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Sustainability continued
ESG Governance continued
Human rights
Pepco Group is committed to business practices in our operations
and supply chain throughout the world that do not infringe human
Group-wide policy revision and summaries continued
rights and that are aligned with international standards of
Anti-fraud
responsible business conduct, including the conventions of the
Pepco Group has zero tolerance of fraud committed by anyone
International Labour Organisation (ILO).
associated with it and takes all appropriate action to prevent
Environment
fraud in respect of its activities. We recognise that the impact
At Pepco Group, we are committed to conducting business in an
of fraud on economies, communities, businesses and individuals
environmentally responsible manner. We recognise the importance
can be devastating, and we therefore do not tolerate any form
of sustainability and strive to reduce our environmental impact in
of fraud connected with our business. We are committed to
key aspects of our operations and supply chain.
complying at all times with applicable anti-fraud laws wherever
in the world we operate.
Child Labour Remediation policy
The Pepco Group has a zero-tolerance approach to child labour.
Anti money-laundering and terrorist financing
We are clear that there must be no recruitment of child labour or
We do not assist, support, participate in or permit money
exploitation of children in any part of our supply chain.
laundering or terrorist financing. Even the slightest suggestion of
being involved in any such activity would be extremely damaging
Whistle blowing
for the Group.
Pepco Group is committed to conducting business with
honesty and integrity and creating a culture of openness and
Gifts and hospitality
accountability. We encourage people to raise concerns and
The proper management of the giving and acceptance of gifts
are committed to supporting those that do. We strongly believe
and hospitality is key to avoiding the risk of actual or perceived
that this ethos will contribute to the success of our business, our
improper influence and obligation. We prohibit the giving or
people and our reputation.
receiving of any gifts. Hospitality must be appropriate and
approved through the correct channels.
Grievance mechanisms and remediation
Conflicts
Since 2021, the independent whistle blowing provider, Safecall,
We try to avoid conflicts wherever possible. Even where there is
has been used by the Group. Over this period, the number of
no ill-intention, the appearance of conflicting interests can
reported cases has varied, prompting us to focus on improving
compromise integrity and damage the Group’s reputation and
the quality of reports through training and to implement a more
image. We should never put our own interests ahead of those of
refined investigation process in FY24. As part of these ongoing
the business, even if it appears that the decisions may be
efforts, a report assessment process was introduced earlier this
beneficial for everyone.
year, overseen by the Group compliance team. This process
ensures that reports are directed to the appropriate subject
Charitable donations, sponsorship and political donations
matter experts for management and investigation, providing
Making charitable donations and supporting community-based
greater visibility at the Group level and a more efficient
initiatives across the jurisdictions we, and our suppliers, operate
experience for the reporter.
in is an important part of our social responsibility commitment. We
Our Whistle Blowing policy has also been updated as referenced
must ensure that donations to charities or political organisations
in the policy section to reinforce our commitment to conducting
are made properly, and that we only support reputable
business with honesty, integrity, and promoting a culture of
organisations, whilst complying with the law and best practice.
openness and accountability. Maintaining a zero-tolerance
Due diligence
stance on retaliation, we strongly encourage individuals to voice
their concerns and remain dedicated to supporting
Our third-party relationships can present risks to the business.
whistleblowers. Going forward, we will incorporate cases of
We could be investigated or prosecuted and suffer significant
retaliation into our metrics, which are designed to monitor the
financial and reputational damage if we are associated with
overall effectiveness of the programme.
people and/or companies who engage in wrongdoing. We
therefore need to understand who we are dealing with and how
To ensure independence from local management when
they operate. We do this by conducting due diligence and
investigating cases, we have implemented measures that drive
assessing all suppliers and third parties with which we interact
impartiality and objectivity throughout the process. This includes
during the course of our business.
diverting certain cases to our Group-level team and introducing
an investigator conflict of interest declaration ensuring that
Sanctions and export control
sensitive or complex matters are handled without bias or
We are committed to complying with our legal obligations relating
influence. Additionally, our newly introduced “triage process”
to sanctions and export controls. As the Group continues to
further reinforces independence by reviewing and classifying
expand its sourcing footprint worldwide, we need to ensure that
cases centrally, ensuring they are escalated to the appropriate
we are vigilant and maintain robust compliance practices that
level for investigation and resolution. This structure helps maintain
keep pace with the rapidly evolving legislation and the
geographical reach of our business.
the integrity and fairness of all investigations.
Competition law
Managing third parties
Pepco Group is committed to fair competition across our
We have further refined our approach to managing third-party
operations anywhere in the world. We do not engage in
relationships and the risks they present to the Group, achieving
practices that restrict fair market competition and are committed
significant progress in recent months. To strengthen our position,
to complying with competition laws in the markets in which we
we have updated our Supplier Code of Conduct, which will be
operate.
re-published in FY25. This revision reinforces our commitment to
Anti-tax evasion
acting ethically and responsibly in all regions where we operate.
Pepco Group is committed to acting ethically and professionally
Our goal is to source products and services in a manner that is
in all our business dealings and takes a zero-tolerance approach
ethical, sustainable, and socially responsible. The revised Code
to tax evasion or the facilitation of tax evasion, whether under
protects the integrity of our supply chain and outlines our
UK law or under the law of any foreign country. We implement and
minimum expectations for how suppliers should operate, helping
enforce effective systems to counter tax evasion and its facilitation.
us uphold our commitment to ethical business practices.
50
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
In addition to complying with legal requirements and our Code,
We aim to be clear and proactive in our interactions with tax
we expect our suppliers to be guided by our dedication to ethical
authorities. Alongside our Corporate Criminal Offence Policy, our
behaviour and to make the right choices. We fully support our
Speak Out Policy and whistleblowing hotline are available in the
suppliers in continually improving their social and ethical
event that concerns are raised about our business conduct and
practices. Connections to individuals or companies involved in
integrity in relation to tax matters. No specific concerns were
misconduct could lead to investigations or legal actions, resulting
raised in this respect through these channels in FY24. We do not
in serious financial and reputational damage. With a network of
currently report on assurance metrics specifically related to tax
suppliers across China, Bangladesh, Hong Kong, India, and
matters; however this is an area that we will consider for future
Pakistan, our due diligence process must address both country-
development.
specific risks, such as corruption and human rights concerns,
and broader risks, including politically exposed persons (PEPs),
Data protection and privacy
sanctions, and watchlists.
This year we have taken significant steps to enhance our data
protection and privacy practices. We are working towards
Additionally, we have focused on enhancing our third-party due
implementing a robust Privacy Management Platform to strengthen
diligence process. Given that third parties carry varying levels of
our accountability and compliance with GDPR and other relevant
risk, the depth of scrutiny applied will be adjusted accordingly.
regulations. We have expanded cooperation among Group
This approach allows the Group to make informed decisions on
companies to establish a unified approach to data protection and
whether and how to engage with each third party. By improving
privacy, aligning policies, frameworks, and functional accountability.
our methods, collecting valuable data upfront, prioritising key
Group-wide training programmes have been launched to engage
jurisdictions, and evaluating the availability and quality of data
employees in privacy matters, raising awareness and fostering a
available in those regions we are better equipped to assess these
culture that values and protects personal data.
relationships both initially and on an ongoing basis. This puts us in
a stronger position to support and grow the business.
We are committed to continuously enhancing our technical and
operational controls to secure the data we manage. This
Our approach to tax
commitment is demonstrated by our active data protection
We understand that the taxes we pay to governments in the
committees and teams across the Group. Additionally, we have
countries in which we operate are central to fiscal policy and
established active processes to uphold data subject rights,
macroeconomic stability, being an important source of revenue
ensuring timely responses to requests. In FY24, we were not
in providing a stable infrastructure, social fabric, and economic
subject to any fines or corrective actions by any relevant Data
environment for citizens of those countries who are also our
Protection Authority.
colleagues and customers. We are committed to conducting our
business in an honest and ethical manner, and our core tax
Reporting boundaries:
principle is to manage our tax affairs responsibly, which means
All entities described in this report are included in the
ensuring that we pay the right and fair amount of tax at the right
consolidated financial statements. Companies subject to
time in the countries in which we operate, in compliance with local
non-financial reporting are defined based on the operational
and international law.
control criteria, considering the significance of individual entities’
impact on relevant activity areas. This includes all relevant
Our Board-approved tax strategy is reviewed and re-published
sources of GHG emissions and other sustainability KPI reporting
annually and, whilst a requirement under UK law, is intended to
data over which the Group has the full authority to introduce and
summarise our overall tax strategy as a Group. Our tax strategy
can be found on our website under “Our approach to tax”:
implement its operating policies at the operation. Under the
www.pepcogroup.eu/about/how-we-operate.
Operational Control approach determined by the GHG Protocol,
100% of the calculated impact arising from Group companies and
Ultimate responsibility for tax governance and management of tax
subsidiary entities over which Pepco Group has operational
risk sits with the Board and the CFO, supported by the Group
control is included. The organisational boundary is reviewed
Treasurer and the Head of Group Tax, who engage with the Group
continuously to ensure that any new operations are included
Audit Committee. Day-to-day management of tax risk for our
where necessary. This is completed using the organisational
operating companies is delegated to the relevant Finance Director.
structure from the Group’s Company Secretary. The ESG team
is kept informed by the Legal Counsel about any changes.
We seek to reduce the level of tax risk arising from our operations
as far as is reasonably practicable by ensuring that reasonable
The updated organisational and property records are then
care is applied in relation to all processes which could materially
reconciled to determine the boundary for the reporting year,
affect compliance with our tax obligations. Known risks are
after which the emissions source data is requested from the
monitored for business and legislative changes which may impact
appropriate site contacts. Emissions from legal entities or leases
them and changes to processes or controls are made when
acquired during the fiscal year will be incorporated into the
required. As a multinational group operating in an increasingly
annual greenhouse gas report from the date of acquisition (or
complex and developing tax environment, some risk is
store opening where relevant, for example in relation to acquired
unavoidable. Nevertheless, the level of risk which we are prepared
store leases) in accordance with the scope and boundary criteria
to accept is consistent with our objective of achieving material
set out in this document. Emissions from entities disposed of
certainty with regard to our tax affairs. When entering into
during the year are included up to the date of disposal within the
commercial transactions we seek to utilise available tax incentives,
respective annual reporting year.
reliefs, and exemptions in line with, and in the spirit of, applicable
During the reporting period Pepco discontinued operations in
tax law and prevailing practice. We observe guidelines published
Austria in February 2024. Emissions data was captured in our FY24
by the Organisation for Economic Co-operation and Development
carbon emissions reporting until the entity was put into liquidation.
(OECD) and endeavour to conduct intercompany transactions on
an arm’s length basis. We do not undertake tax planning unrelated
to commercial or strategic transactions, nor do we undertake tax
planning that is contrived or artificial. We seek to foster positive
relationships with tax authorities and to undertake all dealings with
tax authorities in a professional, courteous, and timely manner.
51
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Risk management
Our approach to
risk management
Risk management and internal control framework
The world around us is constantly changing and so our framework
is designed to be sufficiently agile to respond to external changes
Pepco Group’s enterprise risk management and internal control
in market conditions and geopolitical circumstances.
Framework is an essential part of doing business, enhancing our
resiliency, strengthening operations and building confidence in
Internally, risk management is a focus throughout the
the delivery of our strategy.
organisation. Our “bottom-up” identification of risks is overlaid by
those risks highlighted from the “top-down” review and challenge
Our approach to risk management remains broadly consistent
process by the Group Risk Management Team and Group Board.
with the previous year, leveraging a proactive approach to
These assessments are aggregated, together with the
identify and respond to material risks, executed through
consideration of risks existing at the Group level, to compile an
governance and decision-making.
overall Group-wide view of risk.
Utilising a structured risk management approach helps us to embed
the practices and behaviours needed to create and preserve long
Risk Governance and Operating Model
term value. This is a guided process from risk evaluation, control
The Board is responsible for the review and approval of Pepco
activities, monitoring and continuous improvement.
Group’s risk management framework, our risk appetite and key
strategic and emerging risks. Our risk management is aligned to
our strategy, and each principal risk and uncertainty is considered
Governance and Culture
in the context of how it relates to the achievement of the Group’s
strategic objectives.
The Audit Committee is a subset of the Board and holds
Monitoring and
Strategy
Evaluate
Control
responsibility for independent review of the effectiveness of our
Continuous
Development
Risks
Activities
risk and internal control systems and the quality and accuracy
Improvement
of financial reporting. The Audit Committee is also responsible for
the ongoing monitoring of external audit provision and consideration
of any findings shared from the auditors’ scope of review.
Strategy and
Performance
Review and Revise
Objective Setting
Within the operating business areas, risk management is a key
focus of leadership teams who are responsible for overseeing risk,
internal control and output from our annual audit activities,
Information and Communication
holding business leaders to account for their risk
management responsibilities.
Risk management principles and culture
Providing a range of specialist advice and guidance on a Group
Endorsed by the Board and championed throughout the business,
and local level, technical teams across the business support risk
the framework is designed to identify, prioritise and manage,
management through standards, policies, procedures and direct
rather than eliminate, risks to the business and to provide
interventions to establish control activities.
reasonable assurance against material misstatement or loss.
Governance – Board & Audit Committee
Role: Establishes the strategic direction and objectives of the business and provides governance and oversight of ERM
Direction
Accountability
Delegation
Reporting
Provision of resources
Management
Internal Audit
Day to day operational delivery in pursuit of business objectives,
Independent Assurance
including the management and oversight of key risks
Third Line
•
First Line
Second Line
Independent and objective
•
•
Day to day business operations
Support services providing
assurance on all matters relating
and the provision of services
specialist expertise
to delivery of objectives
to customers
•
•
Setting standards, policies and
Advice and guidance
•
Alignment
Risk ownership
procedures to operate in line
•
Engagement and selection
•
with business risk appetite
Information
Control ownership
of audit partners
sharing
•
Support, challenge and monitor
•
•
Operational and management
Provide assurance on the
the management of risk
Communication
oversight, checks and monitoring
effectiveness of the Company
•
Define the Company risk
risk management practices
framework
52
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Internal reporting
External
Top-down
reporting
•
Review and approval
Group-level risks
by the Board and
•
Consolidation of significant risks from
Principal risks
Audit Committee
underlying risk registers
and uncertainties
•
Full disclosure of
•
Overlay of Group-level risks
•
Review and approval
principal risks and
by the Board and
•
Review and agreement of the principal risks by
uncertainties
Audit Committee
the Executive Directors
•
Full disclosure of
•
Review and approval by the Audit Committee
principal risks and
uncertainties
Business and functional risk registers
•
Development and ongoing maintenance of risk
registers, including consideration of emerging
risks, by business owners and leadership teams
Bottom-up
•
Review and challenge of risk content and
•
Group Risk team
the quality of mitigation plans by the Group
Risk teams
•
Business and
functional
•
Monitoring of risks associated with our
leadership teams
operating companies review and challenge of
risks at leadership forums
•
Policy and
process owners
Emerging risks and issues
•
Monitoring emerging areas of change or issues
that may become significant at a Group level
will make trade off decisions, weighing up the impact of the risk vs
Strengthening our framework:
the potential benefits) or ‘Tolerant’ (meaning that we are willing to
Enhancements to our Audit and Internal Control teams over the past
take justified risks to achieve the highest possible return).
year have strengthened the collaborative ways of working across the
three lines of defence and improvements to internal controls.
Our risk appetite framework continues to mature, with further
development planned in 2024/25 to establish risk appetite metrics
Following the fraudulent phishing attack in Hungary, the Audit and
and improved reporting.
Internal Controls teams initiated a review of the financial control
environment. Some instances of non-compliance with procedures
Risk Management Operation
and accounting rules were discovered, including related to supplier
discounts, although the impact was not financially material. Additional
Monitoring of risks and the
Regular risk review
effectiveness of our internal
with Executive teams
Internal Audit activities were performed together with external
controls through a series of
and the Risk and Audit
forensic specialists to leverage industry best practice and subject
checks and evaluations
Committee to reflect on key
matter expertise. These efforts included performing a comprehensive
across different levels of the
strategic priorities and
analysis of balance sheet positions and implementing measures to
organisation, contributing to
associated risks, informing
1. Strategic
prevent future occurrences. Any issues identified were remediated
an integrated view of
focus points and risk
Development
assurance.
improvement objectives.
and corrected as part of year-end reporting.
Looking ahead, further work is planned to develop our maturity as
part of the risk roadmap. Our plan is endorsed by the Board and
modelled on the international COSO framework, enabling
4. Review
2. Risk
benchmarking and the ability to track our progress. The roadmap
and Revise
Evaluation
seeks to respond to the ever-changing external environment,
alongside close support for business growth, transformation and
continuous control improvement.
Control frameworks aligning
Identification, measurement
to industry best practice
and reporting of risks
3. Control
Risk appetite
standards enable
against consistently applied
Activities
Risk appetite is the amount of risk we are willing to accept in
benchmarking in key areas,
criteria, considering both
e.g. Financial Controls,
pursuit of our strategic objectives, setting out guardrails for
the likelihood of occurrence
General Information
and potential impact to the
decision making and business operations. Risk appetite is forward
Technology Controls, Entity
Group, with clear ownership
looking and takes into consideration the internal and external
level controls. Alongside, risk
sitting with relevant
environment, regulatory obligations, culture, corporate values and
improvement plans and
functional leaders.
the geographies we operate within.
remediation priorities.
Pepco Group’s risk appetite is reviewed at least annually or
A simple structure sits at the heart of the risk framework, ensuring a
following material business changes and approved via the Board.
common understanding and consistent application across the Group
We monitor risk regularly, evaluating our risk position versus
The output from the above process is subject to periodic review and
appetite levels to determine what further actions may be required.
challenge by the Executive Directors and, subsequently, the principal
Appetite levels are described on a three-point scale; ‘Averse’
risks and uncertainties are submitted to the Audit Committee ahead
(meaning that avoidance of risk is a core objective, and we will
of final review and approval by the Group Board.
always select the lowest risk option), ‘Balanced’ (meaning that we
53
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Principal risks and uncertainties
The Directors confirm that they have carried out a robust assessment of the principal risks and
uncertainties facing the Group, including any emerging risks and those that would threaten its
business model and future performance.
Changes to risk profile
•
Readiness for the launch of a digital offers’ solution is a key
strategic focus, ensuring that resiliency, privacy, accessibility
During the year, a coordinated review of existing risks has
and user experience drive engagement.
been undertaken, alongside regular consideration of insight
and the external environment to identify new and emerging risks.
•
Increasing geopolitical instability and impact on global supply
Any potential changes to principal risks are validated through
chains and transportation remains a constant factor in
analysis and evaluation of control measures, actions plans
planning and decision making.
and data points.
The principal risks outlined below represent, in the judgement of
Principal risks
the Group Board, the most significant gross risks to the Group.
The principal and emerging risks are discussed and monitored
throughout the year to identify changes to the risk landscape.
Topical and emerging risks
Risk information flows up through operating companies and
specialist risk teams, creating a Pepco Group wide profile.
•
The macroeconomic environment remains challenging, with
Principal risks are material risks or themes, which are common
inflationary pressures and low unemployment continuing into
across multiple operating areas or have the potential to
this reporting year and being a focus within our plans.
significantly impact strategy or ability to operate. Each principal
•
Consumer sentiment remains cautious and sensitive to the
risk has a defined response strategy, endorsed by the Board
economic environment. This factor, in addition to increasing
and Executive Committee, which is regularly monitored and
costs of doing business, including wage inflation, energy,
reported on.
transportation and costs associated with sourcing and
manufacturing, have the potential to impact profitability in
some of our countries of operation, if not properly controlled.
Risk
Description and key drivers
Risk mitigation
Operations and customer
•
IT Systems –
Disruption or loss of IT systems supporting critical
Information security and data protection policies, underpinned by training
Cyber and DR
processes or data, as a result of internal or external
and awareness programmes, with dedicated cyber security specialists and
events, which could result in disruption to business
Data Protection Officers.
Link to strategy:
operations impacting customers and commercial
•
Security Centre Operations provide 24/7 monitoring and alerting to act on
performance, reputational damage and potential
potential threats.
regulatory actions.
Risk movement:
•
Automated simulated phishing campaigns providing colleagues with
•
Failure to prevent or respond to a cyber-attack
additional training.
resulting in loss of business-critical systems and
data and/or data breaches
•
Critical IT systems have resiliency with proactive monitoring and alerting of
system processing failures.
•
IT system failure
•
IT systems increasingly moved to the cloud providing further resilience and
•
IT system vendor or third party support partner
disaster recovery.
failure or poor performance
•
There is robust IT change management across the Group with change
•
Lack of resilience or recovery capabilities for
freeze periods implemented during the key trading months.
critical businesses processes
Strategy key:
Change key:
Optimising and expanding our
Driving cost and operational
Increased
Unchanged
Decreased
New Risk
store network
efficiency
Deliver stronger cash generation
Enhancing the customer offer
through disciplined investment
R Read more about our strategy on page 12 to 19
54
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Risk
Description and key drivers
Risk mitigation
Legal and compliance
•
Legal and
The business is subject to an evolving regulatory and
Steering Committee in place to focus on regulatory mapping and
compliance
legislative landscape, with the need to remain up
horizon scanning.
to date with changing frameworks across multiple
•
Link to strategy:
In-house legal teams across Group, Pepco and Poundland with
jurisdictions. Failure to comply with legal and
dedicated expertise.
regulatory obligations may lead to fines, criminal
sanctions and significant reputational impacts.
•
Law firm panel of external legal expertise in every key practice area across
Risk movement:
the Group.
•
Compliance with existing laws and regulations
and changing legal landscape
•
Whistleblowing reporting line for colleagues and suppliers to report
concerns around misconduct or non-compliance.
•
Statutory compliance
•
The Group Code of Conduct was updated in 2024, outlining and enhancing
•
Pace and scale of global regulatory change
core values, ethics and regulatory requirements.
and introduction of mandatory disclosures
•
Supplier Code and Supplier Audit Policy to inform suppliers of core
•
New geographies and markets
requirements and behaviours expected.
•
Governance maturity and coverage
•
Suite of Group compliance policies covering topics including anti-bribery
•
IP and brand protection
and corruption, due diligence, conflicts, sanctions etc.
•
•
Ethical Trade Standards and Regulatory
Group-wide mandatory training programme for core, high-risk
Compliance
regulatory areas.
•
•
Supplier Mapping, due diligence and
Specific training programmes for senior managers.
contract protections
•
Group supplier due diligence procedure integrated across
procurement processes.
•
Monitoring of registered IP and embedded checks when developing
IP/branded products.
Operations and customer
•
People and talent Dependence on key personnel and ability to
Aligned talent assessment and development approach across Pepco
attract or retain the required knowledge, skills and
Group and operating businesses.
Link to strategy:
capability, with the right cultural fit, could undermine
•
Performance and talent management process and training in place across
growth plans, strategic and operational delivery.
the business.
•
Attraction and retention
Risk movement:
•
Employee opinion surveys rolled out Group-wide with key themes
•
Geographical labour market challenges
aggregated across all functions and operating companies to understand
employee sentiment, and implement resulting action plans.
•
Availability of specialist knowledge and experience
•
Reward and retention strategy to attract and retain talent, aligned to
•
Post pandemic working environment and
Pepco values and ethics.
arrangements
•
Values based leadership programme to support corporate culture and
•
Culture and wellbeing
conduct expectations for all colleagues.
•
Organisational structure
•
Reward strategy
•
Training and development
Strategy key:
Change key:
Optimising and expanding our
Driving cost and operational
Increased
Unchanged
Decreased
New Risk
store network
efficiency
Deliver stronger cash generation
Enhancing the customer offer
through disciplined investment
R Read more about our strategy on page 12 to 19
55
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Principal risks and uncertainties continued
Principal risks continued
Risk
Description and key drivers
Risk mitigation
Brand and ethics
•
ESG
Failure to meet our customers’ and wider society’s
Group-wide ESG Strategic Framework, goals and vision (see our ESG section
expectations in addressing ESG impacts. Balancing
for further details).
Link to strategy:
the risks we face as a result of climate change and
•
Group CFO responsible for setting the Group’s ESG Strategic Framework,
limiting the impacts our operations have on the
with overall responsibility for execution.
environment and communities in which we trade.
Risk movement:
•
ESG Executive Committee; the purpose of which is to determine, align and
•
Transformation pressures and rapid growth plans
review progress and next steps for ESG across Pepco Group. Chaired by the
•
Adverse external events could increase cost,
Group CFO, its objectives are to create alignment and drive progress across
disrupt our supply chain and operations, and the
the Group. The terms of reference and standing agenda of this Committee
demand for our product
cover all priority material topics as identified in the recent double
materiality assessment.
•
Consideration of ESG within strategy, business
•
change planning and delivery
Updates on ESG progress are made for review and approval at the
Audit Committee each quarter.
•
Extreme weather and climate change
•
The Group business model, including both the vertical integration of our
•
Inflation and supply chain cost pressures
sourcing operations through PGS and the work of our in-house Group
•
sourcing compliance team, provides a high degree of visibility over our supply
Supplier resiliency
chain and constructive working relationships with our supply partners.
•
Lack of long term, strategic planning
•
Democratising sustainability for our customers by offering affordable
and partnerships
choice and demonstrating that price is not a barrier to sustainable and
ethically produced products.
Strategic and change
•
External political, Global economic and political volatility impacting
Steerco established to focus on regulatory mapping and horizon scanning
macroeconomic,
our cost base and earnings potential. Varying
and to oversee projects initiated to prepare the business for changes
and geopolitical
employment levels across Europe, alongside cost of
in policy.
environment
living pressures may undermine customer demand,
•
Projects established to anticipate change and prepare business for impact
whilst foreign exchange instability across sourcing
Link to strategy:
of key changes (e.g. Bulgaria’s entry to the Eurozone).
and operating regions, interest rates, inflation and
core commodity prices may impact margin,
•
Improved sanctions monitoring and sanction screening implemented
destabilise supply chains and impact delivery
for suppliers.
Risk movement:
of strategic growth plans.
•
Group-wide business continuity and disaster recovery programme.
•
Interest rate volatility
•
Diversification of product sourcing.
•
Foreign exchange volatility
•
Inflation
•
Levels of employment and disposable income
•
Increasing cost base, including regulatory
wage increases
•
Sanctions
•
Political instability and transition
•
Business
Failure to implement the Group’s growth strategy:
Store expansion programme continued throughout 2024, adopting a more
transformation
to strengthen market-leading proposition in existing
disciplined approach to growth, with new store openings focusing on our
and long term
markets; and implement long-term expansion into
existing markets.
strategy
new markets.
•
Continued enhancement to our customer offer through store and
•
Link to strategy:
Macroeconomic and political volatility
proposition renewals.
•
•
Business capacity to support the change and
Transformation programmes are aligned to the Pepco Group business
transformation agenda, embedding a robust
strategy and closely governed by senior management.
platform for future growth
•
Dedicated strategy and transformation operating model in place
to support focus and track delivery of key programmes and business
Risk movement:
changes activities.
Strategy key:
Change key:
Optimising and expanding our
Driving cost and operational
Increased
Unchanged
Decreased
New Risk
store network
efficiency
Deliver stronger cash generation
Enhancing the customer offer
through disciplined investment
R Read more about our strategy on page 12 to 19
56
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Risk
Description and key drivers
Risk mitigation
Strategic and change continued
•
Competition,
Ability to effectively respond to a complex and
Brand awareness and customer satisfaction insights gathered regularly
consumer trends
geographically diverse competitive landscape or
•
Diversification across multiple markets, fragmenting and limiting the impact
and behaviours
changes in consumer demand, impacting
of competition
competitive advantage, earnings potential and
Link to strategy:
•
strategic delivery.
Pepco offers price leadership and a differentiated proposition. This is
facilitated by increasing economies of scale and Group-level buying and
•
Fragmented geographical markets
operating cost synergies.
Risk movement:
•
Failure to successfully anticipate and respond to
•
We offer a diverse range of FMCG, homeware-led GM and apparel, providing
competitive changes in a timely and cost-
our core shoppers, with their regular shopping replenishment needs.
effective manor
•
We own and operate a multi-format, Europe-wide variety discount retail
•
Complex competitor dynamic across European
business, through local and therefore convenient stores, located across
20 countries.
discount retail sector and specialist retailers of
varying sizes and product offerings
•
We continue to invest in the development of high-quality, scalable
infrastructure, including information technology, automated warehouses and
more efficient and resilient multi-point distribution.
Finance and treasury
•
Financial,
Insufficient liquidity to meet obligations under
Cash generative including self-funding of expansion.
profitability
credit facilities, settle liabilities, deliver on
•
Significant headroom within the covenants of the existing
and liquidity
corporate goals, and/or inability to access further
Senior Facility Agreement.
external financing in the future.
Link to strategy:
•
€390m Revolving Credit Facility to April 2027.
•
Insufficient earnings
•
Pepco Group bond, issued in 2023, continues to trade strongly indicating
•
Interest rate volatility
strong debt investor appetite.
Risk movement:
•
Access to financing
•
Term Loan B of €250m, that matures in April 2026, remains with a syndicate of
strong and supportive relationship banks at competitive interest rates.
•
Cost control
•
Fraud and
Losses as a result of physical or financial crime,
Group wide fraud risk assessment mapping exposure to fraud risks across
financial crime
both internally and externally, which result in
key processes.
financial losses, reputational damage and cross
•
Suite of Group compliance policies covering topics including anti-bribery
Link to strategy:
functional investigations.
and corruption, due diligence, conflicts, sanctions etc.
•
Fraud
•
Group-wide mandatory training programme for core, high-risk regulatory areas.
Risk movement:
•
Anti-bribery and corruption
•
Specific training programmes for senior managers.
•
Corporate Criminal Offences
•
Whistleblowing reporting line for colleagues and suppliers to report concerns
re. non-compliance.
•
Theft and physical security
•
Payment processing restrictions, defined delegated authority levels and
segregation of duties.
•
Group treasury function oversight and approvals.
•
Collaborative working between Finance and Technology to refine
security controls.
Operations and customer
•
Health and safety Harm to colleagues, customers or third parties
Health and safety Committee structure and business unit action plans.
caused by product design or operating failures
•
Link to strategy:
Health and safety data collected and monitored locally with centrally
could result in business disruption, loss of assets,
reported Group stats tracked.
enforcement action, and reputational loss.
•
Moving to a more integrated model with the introduction of standardised
•
Fire safety
Risk movement:
policies and procedures.
•
Food safety
•
Aligning Group wide model, with input from local representatives and
industry specialists.
•
General health and safety standards in store and
at distribution centres/factories
•
Targeted, data driven, improvement programmes focusing on key areas
of risk and compliance.
•
Third party suppliers delivering in line with Pepco
•
and regulatory standards
Continue to identify and respond to regulatory changes and standards.
•
Assets and premises are acquired to Pepco and
regulatory standards
•
Violence to colleagues and shop workers
Strategy key:
Change key:
Optimising and expanding our
Driving cost and operational
Increased
Unchanged
Decreased
New Risk
store network
efficiency
Deliver stronger cash generation
Enhancing the customer offer
through disciplined investment
R Read more about our strategy on page 12 to 19
57
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Principal risks and uncertainties continued
Principal risks continued
Risk
Description and key drivers
Risk mitigation
Operations and customer continued
•
Supply chain
Disruption of the logistics and distribution network
Experienced buying and supply chain teams responsible for maintaining
an effective and efficient supply chain.
disruption
resulting in inability to maintain sufficient inventory
– logistics
levels to meet growing customer demands without
•
Regular end-to-end supply chain and distribution network and
and inventory
allowing levels to increase to an extent that causes
cost mapping.
excessive markdowns.
Link to strategy:
•
Scalable and repeatable supply chain design, maximising standardisation
•
Impacted global supply routes
for all elements (distribution centres and warehouse management systems)
of the supply chain.
•
Third party supplier insolvency
Risk movement:
•
Consistent, seasonally relevant, levels of stock cover by product category
•
Availability of suppliers which meet operational
are maintained and regularly reviewed.
and ethical standards
•
Shipping product earlier, optimising shipping routes , diversification of
•
Efficient product lifecycle and
carrier base and shipping modes, selectively utilising faster carrier options.
inventory management
•
Customer demand planning
•
Supply chain
Failure to identify, develop or maintain relationships
Integrated in-house sourcing operation, PGS, sources in excess of 80%
disruption
with a significant number of reputable suppliers, to
of own label goods across clothing and general merchandise through its
operations in mainland China, Hong Kong, Bangladesh and India.
– sourcing
source high-quality, low-cost, safe products, may
impact the Group’s financial position or reputation.
•
In-house sourcing model leverages our scale to drive benefits on pricing
Link to strategy:
•
and agree long-term partnerships with strategic vendors.
Loss of key suppliers or decrease in
available product
•
Diversification and expansion of sourcing footprint to reduce the risk of
over-reliance on any single country and increase flexibility through
Risk movement:
•
Inflation pressures on product margin
near-shore sourcing in European countries and additional Asian countries.
•
Human rights
•
Policies are in place to protect the integrity of our supply chain, including
•
a Group-wide Supplier Code of Conduct and ethical and social audit
Labour regulations and ethical standards
programme, managed by our Group ethical sourcing team.
•
Inadequate product quality or safety
•
Established Global Quality Assurance and Quality Control policy with strict
quality control measures to bring low prices and value to our customers
while protecting our brand integrity.
Strategy key:
Change key:
Optimising and expanding our
Driving cost and operational
Increased
Unchanged
Decreased
New Risk
store network
efficiency
Deliver stronger cash generation
Enhancing the customer offer
through disciplined investment
R Read more about our strategy on page 12 to 19
58
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Going concern
Going concern
The FY24 consolidated financial statements have been prepared
on the basis that the Group will continue as a going concern for at
least 12 months subsequent to the authorisation of the
consolidated financial statements for the period under review.
The Group has continued to show resilience in FY24 despite the
challenging economic conditions. Underlying EBITDA growth of
25.2% to €944m illustrates the strong continued profit delivery. In
addition the Group has continued to execute its growth strategy
through the opening of 392 net new stores through self-funded
investment.
Cash has increased year-on-year at €363m (FY23: €330m) which
also includes repayment of a portion of the Group’s debt of €120m.
The Group’s net debt to underlying EBITDA ratio of 1.7x on an IFRS
16 basis (0.5x pre-IFRS 16 basis) has improved remains low, and well
within the targeted range. The Group also remains well financed
with expiry of term loans not until at least April 2026 and retains
significant liquidity headroom, and covenant headroom, should
any further unforeseen volatility arise.
Based on the Group’s cash flow forecasts and financial
projections, alongside assessment of a robust set of plausible but
aggressive downside stress test scenarios, the Directors are
satisfied that the Group will be able to operate within the levels of
its facilities and resources for the foreseeable future and deem it
appropriate to adopt the going concern basis in preparing the
financial statements.
59
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Introduction to governance
Introduction to Governance
Dear Shareholders,
This section of the report outlines the Group's corporate
governance structure and addresses key governance
matters relevant to the Company during the reporting period.
As Non-Executive Chair, I am responsible for ensuring that we
have the right structure in place to uphold high standards of
corporate governance.
This year we have continued to make changes to our Board. In
particular, we have hired a new CEO, Stephan Borchert, and a
new Chair of the Audit Committee, Frederick Arnold. Our
recruitment process has been led by the Nomination Committee,
working with external search providers to ensure we considered
candidates from a wide pool. We continue to ensure the Board
has the appropriate range of skills, knowledge and experience to
act effectively. We will continue to review our governance
structures in FY25 to ensure we have the most effective Board
possible as we manage change within the business.
I would like to thank our Board and our colleagues for their
continued commitment to the success of the Group for the benefit
of all our customers, colleagues, investors and other stakeholders.
Andy Bond
Non-Executive Chair
Pepco Group N.V. (the Company) is a public limited liability
the Articles of Association, the Board of Directors Rules of
company incorporated under the laws of the Netherlands on
Procedure (Board Rules), and the terms of reference of the
14 May 2021, having been converted from Pepco Group B.V,
Board’s Committees, as well as applicable laws and
incorporated on 17 February 2021. Its shares are listed on the
regulations. The Articles of Association, Board Rules and
Warsaw Stock Exchange (Giełda Papierów Wartościowych
terms of reference of the Board’s Committees can be viewed
w Warszawie) (WSE).
on the Company’s website at www.pepcogroup.eu.
The Company is registered in the commercial register of the
As the Company is incorporated under the laws of the
Chamber of Commerce and Industry for Amsterdam under
Netherlands and listed on the Warsaw Stock Exchange, the
number 81928491. The corporate seat of the Company is in
Company complies with the Code of Best Practice for GPW
Amsterdam and the registered office is 14th Floor, Capital
Listed Companies 2021 (the Warsaw Code) and with the Dutch
House, 25 Chapel Street, London, NW1 5DH, United Kingdom.
Corporate Governance Code 2022 (the Dutch Code).
The Company is organised in a one-tier Board structure, under
The full text of the Warsaw Code is available at www.gpw.pl/
which managing and supervisory duties are performed by the
best-practice2021 and the full text of the Dutch Code can be
Board of Directors of the Company (the Board). The Board is
viewed at www.mccg.nl. Deviations from the Dutch Code and
responsible for the direction and oversight of the Company
Warsaw Code are explained in this report in accordance with
and is accountable for all aspects of the Company’s business.
the “comply or explain” principle.
The Company’s corporate governance structure is based on
60
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
The Board
Eight Non-Executive Directors
Two Executive Directors
Our eight Non-Executive Directors provide independent oversight
Our CEO and CFO are appointed to the Board
and constructive challenge to the Executive Directors.
as Executive Directors.
Board Committees
Audit Committee
Nomination Committee
Remuneration Committee
Key responsibilities:
Key responsibilities:
Key responsibilities:
•
•
•
reviewing the integrity of the financial
leading the process for Board
recommending the Remuneration
statements and any formal
appointments and succession planning;
Policy and Executive and senior
announcement relating to the
leadership remuneration framework
•
undertaking the Board evaluation
Group’s financial performance;
of the Company;
including an externally led evaluation
•
•
providing oversight of the Group’s
at appropriate times; and
advising on the structure and target
internal control and risk management
setting of performance-based
•
making recommendations to the
systems; and
incentive plans; and
Board on the Board’s policy on
•
•
assisting the Board with reviewing risk
diversity and inclusion.
reviewing all share incentive plans.
management, policies and exposures,
and ESG strategies, reporting, and
goals.
Membership:
Membership:
Membership:
•
•
•
Frederick Arnold (C)
María Fernanda Mejía (C)
Brendan Connolly (C)
•
•
•
María Fernanda Mejía
Brendan Connolly
Grazyna Piotrowska-Oliwa
•
•
•
Brendan Connolly
Neil Brown
Paul Soldatos
•
•
•
Neil Brown
Paul Soldatos
Neil Brown
•
•
•
Sean Mahoney
Sean Mahoney
Frederick Arnold
•
Andy Bond
Executive Committee
The Executive Committee, composed of key leaders, directs the Company’s strategies, ensuring alignment with objectives and fostering
sustainable growth through collective expertise and decisive leadership.
Senior leadership team
1
This diagram shows the structure of the Board and its Committees as at the date of publication.
2
Whilst Andy Bond is formally a Non-Executive Director, he temporarily had Executive duties in his role of Executive Chair until 1 October 2024.
61
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Board of Directors
We have a strong, experienced Board, with a diverse range of professional
backgrounds, skills and perspectives. The collective experience of the Directors
and the diverse skills and experience they possess, supported by independent
thought and constructive debate, enable the Board to reach decisions in a
focused and balanced way, which is crucial to ensuring the continued long-term
success of the Company.
Andy Bond
Stephan Borchert
Neil Galloway
María Fernanda Mejía
Non-Executive Chair
Chief Executive Officer
Chief Financial Officer
Independent
British, Male, 59
German, Male, 55
British, Male, 56
Non-Executive Director
Appointed 2 February 2023;
Appointed 1 July 2024;
Appointed 1 April 2023;
American, Female, 61
first term expires in 2026
first term expires in 2027
first term expires in 2026
Appointed 24 May 2021;
second term expires in 2027
N
N
A
Andy has an extensive retail
Stephan has a strong track
Neil joined Pepco Group as
María Fernanda has broad
career, focused on the
record of leading
CFO in April 2023. He has
experience and expertise in
discount sector, having been
international companies
worked as a public company
general management
CEO of Pepco Group until his
across various sectors
CFO in senior finance and
including strategy
retirement from the role in
including fashion, beauty,
commercial roles at
development, operations,
January 2022. Prior to this,
pharmacy and healthcare
multi-national businesses
supply chain and talent
Andy was COO and later
services. His extensive
over the last 15 years.
development. In February
CEO of Asda between 2005
experience in leading
Previously Neil spent 18 years
2024, María Fernanda was
and 2010, and chair from 2011.
complex, multi-brand retail
working in investment
appointed as independent
Earlier in his career,
businesses globally and in
banking. Prior to Pepco, Neil
non-executive director and
Andy acted as corporate
EMEA made him the
was executive vice president
member of the audit
marketing director and
stand-out candidate in the
at IWG plc and led the
committee of Avery Dennison
managing director of George
search process. Stephan
corporate finance and
Corporation. Until February
clothing. Andy has been the
served from 2018 to 2022 as
business development
2023, she was CEO
non-independent Chair of
CEO of GrandVision, the
activities. From 2013 to 2019,
International at Newell
the Pepco Group Board since
global leader in optical retail
Neil was group finance
Brands. Until February 2020,
his appointment in February
operating in over 7,400 stores
director at DFI Retail Group,
she served for more than
2023. From 12 September
in more than 40 countries
the international multi-format
eight years as corporate
2023 he also adopted the
worldwide under 33 different
retailer based in Hong Kong
officer and executive
role of interim Executive Chair
retail banners. Prior to
and operating across 11
committee member at the
until 1 October 2024.
GrandVision, Stephan was
markets in Asia. Prior to that
Kellogg Company, with her
President of Sephora
he was group finance director
final roles being senior vice
EMEA on the Global
of The Hongkong & Shanghai
president and president of
Executive Committee.
Hotels Limited. He is also a
Kellogg Latin America. Prior to
non-executive director of AVI
this, María Fernanda spent 23
Global Trust plc, a FTSE 250
years at the Colgate-
investment trust.
Palmolive Company in global
marketing and senior
management roles within
developed and emerging
markets. Maria Fernanda
previously held non-
executive roles at Bunzl plc,
Grocery Outlet and
International Consolidated
Airlines Group.
62
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Committee membership
A
Audit Committee
N
Nomination Committee
R
Remuneration Committee
Chair of Committee
Brendan Connolly
Grazyna Piotrowska-Oliwa
Neil Brown
Paul Soldatos
Independent
Independent
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
British, Male, 65
American, Male, 75
British, Male, 68
Polish, Female, 55
Appointed 17 February 2021;
Appointed 4 May 2021;
Appointed 24 May 2021;
Appointed 24 May 2021;
second term expires in 2027
second term expires in 2027
second term expires in 2027
second term expires in 2027
R
A
N
R
A
N
R
N
R
Brendan brings operational,
Grazyna has board
Neil has global experience in
Paul is a board member and
commercial and strategic
experience across
corporate restructurings,
senior advisor in the
expertise. He is a non-
government and business
private equity and dispute
industrial, service and
executive director at Victrex
both in Poland and Central
resolution including wide
consumer/retail sectors. He
and Applus. Brendan has
and Eastern Europe. At the
international commercial
has international experience
more than 30 years
start of her career, Grazyna
board roles. He has held a
in M&A, strategic assessment,
experience in the oil and gas
spent four years at the Polish
number of chairman, director,
organisational transformation
and the testing and
Ministry of the State Treasury,
and committee positions in
and financial restructuring
inspection industries. He was
where she headed two
international organisations
with a focus on the US and
a senior executive at Intertek
different divisions. With a
including Magma Fincorp
Europe. Paul has served and
Group, having been CEO of
proven track record in some
India, Gategroup, Iceland
is serving as chairman or
Moody International, which
of Poland’s WIG20
Foods, and Islandsbanki.
member of the audit,
was acquired by Intertek in
companies, Grazyna worked
Earlier in his career Neil
remuneration, governance,
2011. Brendan was managing
for 20 years at C-level for
helped to build the successful
and nomination committees
director of Atos in the UK
Telekomunikacja Polska and
financial services arm of
for a number of companies.
after spending more than
PTK Centertel (now Orange
Apax Partners. He acted as a
Paul previously was a partner
25 years with Schlumberger
Polska), PZU (on the
special advisor to the Senior
and member of the
in various senior
supervisory board), PKN Orlen
Oversight Committee of the
management committee of
international roles.
and PGNiG, as well as CEO
Asset Protection Scheme,
AEA Investors LP in AEA’s
and president of the
operated by an executive
London office.
management board of Virgin
arm of HM Treasury. Neil is a
Mobile Poland/CEE, following
qualified Chartered
a period advising private
Accountant and a former
companies and private
corporate finance partner at
equity funds. Grazyna is
PwC and Deloitte.
co-owner and CEO/chair of
renowned e-commerce
platforms Grupa Modne
Zakupy and RentPlanet.
63
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Board of Directors continued
Committee membership
A
Audit Committee
N
Nomination Committee
R
Remuneration Committee
Chair of Committee
Board and Board Committee changes post year end
•
Stephan Borchert was appointed as Executive Director
and CEO on 1 July 2024 with a three-month induction to
allow for a smooth transition from Andy Bond’s interim
role as Executive Chair. Andy Bond reverted to the role of
Non-Executive Chair on 1 October 2024.
Frederick Arnold
Sean Mahoney
Board changes in FY24
Independent
Non-Executive Director
•
Helen Lee Bouygues resigned on 2 October 2023
Non-Executive Director
American, Male, 62
American, Male, 70
(appointed 4 May 2021).
Appointed 15 March
Appointed 6 June 2024;
2024; first term expires
•
Pierre Bouchut resigned on 15 March 2024 (appointed
first term expires in 2027
in 2027
24 May 2021). Served as Chair of the Audit Committee
until 15 March 2024.
A
R
A
N
•
María Fernanda Mejía was appointed as Chair of the
Nomination Committee on 2 October 2023.
Fred is an experienced
Sean is a private
senior financial
investor and has served
•
Neil Brown, Paul Soldatos and Brendan Connolly were
executive who has
as a board director for
appointed as members of the Nomination Committee on
served on the boards of
public and private
13 November 2023.
numerous public and
companies in Europe
•
Sean Mahoney was appointed as member of the Board
private UK and US
and the US including
and a member of Audit and Remuneration Committees
companies. He has
Aptiv plc, Howmet
on 15 March 2023.
experience serving as
Aerospace Inc., Alcoa
board chair, audit
Inc., Lehman Brothers
•
Frederick Arnold was appointed as a member of the
committee chair and
Holdings (post-
Board, Chair of the Audit Committee and a member
the chair of a variety of
bankruptcy), Formula
of the Remuneration Committee on 6 June 2024.
transactional and other
One Holdings, and
special committees.
Tailored Brands Inc. He
Fred has led the global
worked in investment
finance functions of a
banking for over 20
series of private equity
years, primarily at
owned portfolio
Goldman Sachs & Co.,
companies. Prior to this,
where he was a partner
Fred accrued 20 years
and head of the
of investment banking
Financial Sponsors
experience, primarily at
Group. Sean contributes
Lehman Brothers and
expertise in business
Smith Barney (where he
and financial strategy,
was managing director,
private equity, capital
head of European
markets, financing
investment banking). He
and M&A.
has extensive
experience in M&A and
in global equity and
debt capital markets.
64
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Corporate governance statement
Board of Directors
Appointment and composition of the Board
Stephan Borchert was appointed as an Executive member of the
The role of the Board is to supervise and manage the general
Board and CEO, effective 1 July 2024. Andy Bond remained in his
affairs of the Company and its affiliated enterprises (the Group).
role as Executive Chair during the transition period, reverting to
The Board is collectively responsible for supervising the strategy
the role of Non-Executive Chair on 1 October 2024.
and long-term success of the Company to achieve its objectives,
Prior to this reporting period and in accordance with Article 15.5 of
and for ensuring that there is an effective system of internal
the Company’s Articles of Association, the Board appointed Neil
controls within the Group for the assessment and management of
Brown as Vice Chair of the Board.
key risks. In discharging its role, the Board ensures that the Group
takes into account the interests of all the Company’s stakeholders.
The general meeting appointed Sean Mahoney as a Non-
Executive Director at the Company’s AGM in March 2024. Frederick
In supervising the strategy of the Company, the Directors also
Arnold was appointed as a Non-Executive Director and Stephan
take into account the following matters:
Borchert as an Executive Director and CEO at the Company’s
•
the implementation and feasibility of the strategy;
EGM in June 2024. Following the EGM, at the end of the reporting
period the Board comprised ten members. As at the end of the
•
the appropriateness of the Company’s business model and the
reporting period, four of the Non-Executive Directors – Brendan
markets in which the Group operates;
Connolly, María Fernanda Mejía, Frederick Arnold, and Grazyna
•
the opportunities and risks for the Company;
Piotrowska-Oliwa – are considered to be independent in
accordance with best practice provisions of the Warsaw Code
•
the Company’s operational and financial goals and their
and the Dutch Code. The remaining four Non-Executive Directors
impact on the Group’s future operations in its markets;
– Andy Bond, Neil Brown, Paul Soldatos and Sean Mahoney – are
•
compliance with the Company’s legal and regulatory
not considered to be independent within the best practice
obligations; and
provisions of the applicable Codes. Andy Bond, as former CEO
and Executive Director of the Company, does not qualify as
•
ESG and employee-related matters, the Group’s supply chain
independent. Neil Brown, Paul Soldatos and Sean Mahoney are
and respect for human rights.
not independent due to their position as directors of the
The tasks, responsibilities and internal procedures for the Board
Company’s principal shareholder.
are addressed in the Articles of Association and Board Rules.
Board members are appointed for an initial period of three years
and may then be reappointed for two subsequent three-year terms.
Roles and responsibilities
All Directors are subject to formal appointment by shareholders
The Executive Directors are responsible for the day-to-day
at the AGM and to reappointment after a three-year term in
management of the Company. The Non-Executive Directors are
office, following a binding nomination of the Board and in
responsible for supervising and advising the Executive Directors.
accordance with the Articles of Association of the Company.
The positions of the Chair and CEO are distinct, each with their
The general meeting of shareholders may reject a binding
own areas of responsibility, conferred by and accountable to the
nomination of the Board by a resolution passed by two-thirds
Board as a whole. This distinction is explained below, and further
of the votes cast, representing more than half of the Company’s
details are set out in the Articles of Association and the Board
issued share capital.
Rules of Procedure available on the Company’s website.
The general meeting of shareholders can dismiss and suspend
The Chair of the Board is a Non-Executive Director and is
members of the Board (other than on the proposal of the Board)
responsible for leading the Board and ensuring its effectiveness,
upon a majority of two-thirds of the votes cast, representing
setting its agenda and maintaining high standards of corporate
more than half of the Company’s issued share capital. If the
governance. The Chair facilitates the effective contribution of the
proposal is made by the Board, a simple majority of the votes
Non-Executive Directors and constructive relations between them
cast is sufficient.
and the Executive Directors.
The Chair of the Board and the Board itself are supported by
The CEO is responsible for the day-to-day management of
the Company Secretary, who is appointed by the Board and
the Group and implementation of the strategy and other
available for advice and assistance to all Board members.
Board decisions.
The Company Secretary is responsible for ensuring that proper
procedures are followed and that the Board acts in accordance
With effect from 12 September 2023, Andy Bond, the Chair of the
with its statutory obligations as well as its obligations under the
Board, stepped into the role of Executive Chair to temporarily lead
Articles of Association.
the Executive team and overall management of the Company.
Whilst both roles were being performed by the Executive Chair,
Where Board members have external appointments, the Board is
this did not amend the respective roles and responsibilities of the
satisfied that such appointments do not impact on the individual
Chair and CEO.
Board member’s ability to devote adequate time and sufficient
attention to the concerns of the Company.
As of 1 July 2024, Stephan Borchert was appointed as CEO of the
Group following recommendation by the Nomination Committee.
Andy Bond stepped down as Executive Chair on 1 October 2024
Diversity
following a three-month transition period.
Our Board Diversity Policy has been in place since December 2021,
and addresses the legal and regulatory requirements to set
Prior to the reporting period, the Board established an Executive
appropriate and ambitious targets to achieve a more balanced
Committee. The Executive Committee, composed of key leaders
ratio between men and women. Our Board Diversity Policy seeks
including the Group CFO and business Managing Directors, directs
at least 30% representation of men and women on the Board. As
the Company’s strategy, ensuring alignment with objectives and
at year end, the Board comprised eight Non-Executive Directors:
fostering sustainable growth through collective leadership.
six are male (75%) and two are female (25%).
65
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Corporate governance statement continued
Board of Directors continued
Board and Committee meetings and attendance
All Directors are expected to attend each Board meeting and
Diversity continued
each Committee meeting for which they are members, unless
there are exceptional circumstances preventing them from
When considering nominations of new Board members, the Board
participating. Attendance at Board and Committee meetings
takes account of the following diversity aspects: nationality, work
was as follows:
background, gender, age, and qualifications (including education
and expertise). The Board is committed to promoting diversity
Audit Remuneration Nomination
within the Group and ensuring any barriers identified are removed.
Board Committee
Committee Committee
This remains a key consideration in succession planning at both
Directors
(15)
(14)
(6)
(6)
Board and senior management level.
Andy Bond
(Executive Chair)1
15
n/a
n/a
5
Induction, training and development
Neil Brown
When appointed to the Board, Directors are provided with
(Vice Chair)
15
12
6
4
induction training and information about the Group, the role of
Paul Soldatos
13
n/a
6
4
the Board and the matters reserved for its decision, the terms of
Brendan Connolly
14
12
6
5
reference and membership of the Board Committees, and the
María Fernanda
latest financial information about the Group. This is supplemented
by meetings with the Company’s professional advisors, and,
Mejía
15
13
n/a
5
where appropriate, visits to key locations and meetings with
Grazyna
certain senior Executives to develop the Directors’ understanding
Piotrowska-Oliwa
14
n/a
6
n/a
of the business.
Neil Galloway
15
n/a
n/a
n/a
Helen Lee
Throughout their period of office, Non-Executive Directors are
Bouygues2
—
—
—
—
continually updated on our business, markets and other changes
Pierre Bouchut3
3
7
1
n/a
affecting the Group and sector in which we operate, including
changes to the legal and governance environment and the
Stephan
obligations on themselves as Directors. Specific updates this
Borchert4
3
n/a
n/a
n/a
year included an externally facilitated Board risk workshop.
Frederick Arnold5
3
2
2
n/a
Sean Mahoney6
6
4
n/a
3
Board Committees
The Board operates the following principal Committees: the
1
Andy Bond was appointed as Non-Executive Director and Chair of the Board
with effect from 2 February 2023. He was appointed as Executive Chair on
Audit Committee, the Remuneration Committee, and the
12 September 2023 until 1 October 2024.
Nomination Committee. The function of these Committees is
2
Helen Lee Bouygues was appointed as a Non-Executive Director of the Board
to prepare the decision making of the Board.
on 4 May 2021. She resigned on 2 October 2023.
3
Pierre Bouchut was appointed as a Non-Executive Director of the Board on
Each Committee of the Board has established terms of reference
24 May 2021. He resigned on 15 March 2024.
which prescribe the role and responsibility of the relevant
4
Stephan Borchert was appointed Executive Director of the Board with effect
Committee, its composition, and the process through which the
from 1 July 2024.
Committee discharges its duties. These terms of reference are
5
Frederick Arnold was appointed as a Non-Executive Director of the Board on
6 June 2024.
available on the Company’s website: www.pepcogroup.eu.
6
Sean Mahoney was appointed as a Non-Executive Director of the Board on
During the reporting period, more than half of the members of
15 March 2024.
the Audit Committee (including its Chair) and the Remuneration
7
n/a - not formally a committee member but may have been in attendance at
a meeting as an observer.
Committee were independent within the meaning of the
applicable best practice provisions of the Warsaw Code and
Board meetings, attendance and decision making
Dutch Code with due observance to the Dutch Decree
on Implementation.
According to the Board Rules, the Board meets in principle once
every two months and at least once each financial quarter. Each
Director is entitled to cast one vote. In the event of a tie, the Chair
Risk workshop
has the casting vote. During FY24, meetings of the Board were
held both in person and virtually via Microsoft Teams, as permitted
by Article 16.6 of the Articles of Association.
A series of risk workshops and Committee meetings
have taken place throughout the year, resetting the
Most decisions of the Board require a simple majority of the votes
enterprise-wide view of risk and shaping the roadmap
cast. For Board decisions on matters which cannot be resolved
for further improvements.
upon by the Non-Executive Directors due to a direct or indirect
conflict of interest and for Board decisions to approve a related
•
November 2023 – Board risk workshop to review and
party transaction, the majority of votes cast must include at least
validate the output from a series of bottom-up, business
a majority of the votes of the independent Non-Executive
risk workshops. Provided an opportunity for the Board to
Directors.
share their top-down perspectives.
When determining how many votes are cast by members of the
•
December 2023 – Review and approval of a roadmap
Board, no account shall be taken of Board members who are not
to mature the risk approach across the Group
permitted to take part in the discussions or decision making due
and enhance risk management capabilities and
to a conflict of interest.
response activity.
Decisions of the Board may be taken in writing, provided that all
•
May 2024 – Board risk workshop to confirm a refined set
Board members (in respect of whom no conflict exists) have
of principal risks and response plans, as well as review,
consented in writing.
stress testing and approval of an initial risk appetite
framework and corresponding levels.
66
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Areas of focus in FY24
Remuneration
The Board focused on the below areas during the reporting period:
In line with the Remuneration Policy of the Company, the
remuneration of the Executive members of the Board is
Strategy and operational
determined by the Non-Executive members of the Board, upon
•
Scrutinised operational and business performance in the
recommendation of the Remuneration Committee. The
context of the Company’s business plan and long-term
Non-Executive Directors appointed via the Relationship
strategy, including the status of key projects.
Agreement (being Neil Brown, Paul Soldatos and Sean Mahoney)
•
do not receive remuneration from the Company or its affiliated
Reviewed the Group’s strategy and approved the five-year
business plan for FY24 to FY28.
enterprises. The remuneration of the Non-Executive members of
the Board is determined by the Non-Executive members of the
External stakeholder engagement
Board in accordance with the Remuneration Policy applicable to
•
Reviewed the agenda for the Capital Markets Day.
the Non-Executive Directors, including the Chair of the Board.
•
Reviewed the content of the Company’s external announcements.
The Remuneration Policy and the elements of the remuneration
Financial performance and risk
of Board members are set out in the Remuneration report and
•
note 8 to the financial statements.
Reviewed financial performance and forecasts.
•
Evaluated and approved the FY24 budget.
Conflicts of interest
•
Approved the Company’s Annual Report and Consolidated
The Articles of Association and Board Rules prescribe how
Financial Statements for FY23, together with the letter of
conflicts of interest between the Company and Board members
representation in connection with the Annual Report 2023.
must be managed.
•
Reviewed approach to risk and risk management framework.
Transactions between the Company and a Board member who
has a conflict of interest must be entered into on arm’s length
Governance
terms. A Board member who has a conflict of interest cannot
•
Approved the terms of reference of the Audit Committee,
participate in deliberations and decision making relating to the
Remuneration Committee, and Nomination Committee.
subject matter of the conflict of interest.
•
Approved the appointment of the new CEO, Stephan Borchert,
In FY24, payments totalling £63,932.10 were made to Woodcliffe
on the recommendation of the Nomination Committee.
Associates Limited, a company that Andy Bond has a related
•
Approved the appointment of the new Non-Executive Directors,
party interest in.
Frederick Arnold and Sean Mahoney.
Any decision to enter into a transaction under which a member of
•
Approved the external appointments held by Executive Directors.
the Board has a conflict of interest that is of material significance
to the Company and/or the relevant Board member requires the
•
Approved the updated UK tax strategy.
approval of the Board.
•
Approved the updated Board profile as required by the
There were no material transactions which gave rise to conflicts of
2022 Dutch Code.
interest with any Board members reported during the reporting
•
Approved the external evaluation of the Board, on the
period. Reference is made to note 24 (Related party transactions)
recommendation of the Nomination Committee.
of the consolidated financial statements for a description of any
related party transactions.
•
Approved the FY24 Internal Audit Plan.
•
Recommended to the shareholders the appointment of Forvis
Risk management activities of the Board
Mazars as the Company’s external auditors for FY24.
The Board has the overall responsibility for ensuring that the
Group maintains a strong system of internal controls.
•
Approved the Agenda and Convocation Notice for the 2024
AGM and EGM.
The system of internal controls is designed to identify, manage
and evaluate, rather than eliminate, the risk of failing to achieve
•
Reviewed and approved the updated Bank Mandates
business objectives. It can therefore provide reasonable but not
for Treasury Activities.
absolute assurance against material misstatement, loss or failure
•
Approved changes to the Board Rules.
to meet objectives of the business, due to the inherent limitations
of any such system.
•
Approved the renewal of the Directors and Officers
insurance policy.
Internal audit activities are consolidated into one independent
Group internal audit function to provide assurance over key risks in
all operating companies. A Group risk management framework is
in place and updates to risk registers are presented to the Board.
The Board is satisfied that the key risks to the business and
relevant mitigating actions are acceptable for a business of the
type, size and complexity as that operated by the Group.
67
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Corporate governance statement continued
Board of Directors continued
Convocation
The AGM is convened by publication of a notice on the Company’s
Risk management activities of the Board continued
website at least 42 days prior to the AGM. Shareholders are
entitled to propose items for the agenda of the AGM provided
The key elements of the Group’s system of internal controls are
that, alone or jointly, they hold at least 3% of the issued share
as follows:
capital of the Company. Proposals for agenda items must be
•
Financial reporting: Monthly management accounts are
submitted at least 60 days prior to the date of the meeting. A
provided to members of the Board that contain current
request of a shareholder for an item to be included on the
financial and operational reports. Reporting includes an
agenda of the AGM must be explained in writing. The principles of
analysis of actual versus budgeted performance and overviews
reasonableness and fairness may permit the Board to refuse
of reasons for significant differences in outcomes. The annual
the request.
budget is reviewed and approved by the Board. The Group
reports half yearly.
Voting rights
•
Risk management: A risk profile has been created and is
The authorised share capital of the Company is €17,250,000.00
regularly updated and monitored. Each risk identified is
and is divided into 1,725,000,000 shares with a nominal value of
allocated an owner and the action required.
€0.01 each. The issued share capital is €5,760,273.42 divided into
576,027,342 shares. Each share carries one vote. The shares are
•
Monitoring of controls: The Audit Committee receives regular
listed on the WSE.
reports from the external auditors and internal audit. There are
formal policies and procedures in place to ensure the integrity
All shares carry equal rights and are freely transferable.
and accuracy of the accounting records of the Group and to
Shareholders who hold shares on a statutory record date
safeguard its assets.
(i.e the 28th day prior to the AGM) are entitled to attend and
•
Staff policies: There are formal policies and processes in place
vote at the AGM.
within the Group supported by third-party technology in
Shareholders may exercise their rights if they are the shareholders
relation to anti-bribery and corruption and anti-slavery, as well
of the Company on the record date and they or their proxy have
as whistleblowing polices and independent reporting
notified the Company of their intention to attend the AGM in
mechanisms to facilitate the reporting of any suspected
writing or by any other electronic means that can be reproduced
wrongdoing or malpractice.
on paper ultimately at a date set for that purpose by the Board,
R Information on the key risks and uncertainties of the Group is set out
which may not be earlier than the seventh day prior to the AGM.
on pages 54 to 58
Each share in the issued share capital of the Company confers
General meetings
the right to cast one vote at the AGM.
The Articles of Association require that the AGM be held in the
Adoption of resolutions
Netherlands within six months of the end of the financial year.
Subject to certain exceptions provided by Dutch law or the
Additional general meetings may be convened at other times by
Articles of Association, resolutions of the AGM are adopted by
the Board as necessary. The Company’s FY24 AGM was held at
a simple majority of the votes cast at the meeting.
the Hilton Amsterdam Airport Schiphol on 15 March 2024.
Shareholder votes can be cast either in writing or electronically.
Shareholders were invited to attend the AGM in person, and the
AGM was broadcast via the Company’s website. The right to vote
at the AGM could be exercised by an electronic voting proxy with
Amendment of Articles of Association
voting instructions to a civil law notary or submitting the voting
The Articles of Association can be amended by resolution of the
instructions by means of a proxy form via the Company’s website.
AGM. A resolution to amend the Articles of Association can only
Shareholders were entitled to submit questions about agenda
be adopted at the proposal of the Board.
items prior to the AGM.
Appointment and dismissal of Directors
The FY25 AGM will be held prior to 31 March 2025. The Articles of
The Company has a one-tier system of management that means
Association provide that the agenda for the AGM shall at least be
that managing and supervisory duties are carried out by the
as follows:
Board. Appointment and/or dismissal and/or suspension of the
•
advisory vote in respect of the Remuneration report;
members of the Board is the prerogative power of the general
meeting of the shareholders. Each Executive Director may also, at
•
discussion of the Annual Report;
any time, be suspended by the Board. Pursuant to the Articles of
•
discussion and adoption of the annual accounts;
Association, the number of Directors shall be determined by the
Board. Following a binding nomination by the Board, with due
•
discharge of the Board members from their liability;
observation of the provisions under the Articles of Association, the
•
(if put on the agenda) designation of the Board as competent
Directors are appointed at the general meeting. If and when
to issue shares;
selecting and nominating candidates for the Board, the Diversity
Policy is taken into consideration.
•
(if put on the agenda) appointment of external auditors; and
•
(if required) authorisation of the Board to permit the Company
to acquire its own shares.
68
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Substantial shareholdings
c) transactions and arrangements between the ITBV group of
companies and the Group will be conducted at arm’s length
Pursuant to the Financial Supervision Act (Wet op het financieel
and on normal commercial terms; and
toezicht) and the Dutch Decree on Disclosure of Major Holdings
d) no member of the ITBV group of companies will propose or
and Capital Interests in Issuing Institutions, the Company has
procure the proposal of a member resolution which would
been notified of the following substantial shareholdings regarding
prevent the Company from complying with its legal and
the Company as at 30 September 2024:
regulatory obligations.
Shares
Percentage
Issuance of shares, acquisition of own shares,
Total free float on WSE, of which:
disapplication of pre-emption rights and transfers
Non-substantial shareholdings
155,698,955
27.03
of shares
Andy Bond*
3,745,301
0.65
The Articles of Association provide that the general meeting may
Independent Non-Executive Directors**
101,915
0.02
issue shares (or delegate that authority to the Board). Any
IBEX Retail Investments (Europe) Limited 415,594,616
72.15
delegation to the Board to issue shares must specify the
Pepco Group Employee Benefit Trust***
886,555
0.15
maximum number of shares that can be issued under the
delegation and the duration of the delegation cannot exceed five
Total
576,027,342
100.00
years. The designation can be extended for periods not
exceeding five years.
*
Including shares held via Kent Road Investments 2019 Limited and Kent Road
Investments 2020 Limited.
A resolution by the general meeting to issue shares or to
** Includes shares held by the previous Audit Committee Chair, Pierre Bouchut.
designate such authority to the Board can only be taken at the
*** Shares are held on trust for the benefit of current and former employees and
proposal of the Board.
the trust operates for the fulfilment of the VCP and LTIP, as described in the
Remuneration report.
The Articles of Association permit the general meeting to restrict
72.15% of the Company’s issued share capital is ultimately owned
or exclude the pre-emption rights of shareholders at the proposal
by IBEX Topco B.V. (ITBV), with 0.02% owned by the independent
of the Board. A resolution to exclude shareholders’ pre-emption
Non-Executive Directors, 0.65% owned by Andy Bond, Non-
rights requires a majority vote of at least two-thirds of votes cast
Executive Chair, and the remaining 27.03% traded on the WSE. Of
if less than half of the Company’s issued and outstanding share
the shares traded on the WSE, no shareholder owns more than 5%.
capital is present at the general meeting.
At the time of the Company’s initial listing on the WSE, the
Under the Articles of Association, the Company may acquire its
Company entered into a relationship agreement with Steinhoff
own shares if the general meeting authorises the Board to do so.
International Holdings N.V. and certain of its affiliate enterprises.
An authorisation for the Board to acquire shares in the Company
Following the implementation of the Steinhoff reorganisation, the
is limited to eighteen months. Such authorisation was obtained at
rights of Steinhoff International Holdings N.V. were transferred to
the AGM in March 2024, and will be requested at the AGM in March
ITBV, resulting in an amended and restated agreement between
2025.
ITBV and certain of its affiliate enterprises (the ITBV Affiliates) to
No authorisation of the general meeting is required for the
regulate the relationship between the Company and the IBEX
Company to acquire its own shares for the purpose of transferring
group of companies (the Relationship Agreement). The terms of
such shares to employees of the Group under an applicable share
the Relationship Agreement comply with the requirements of
plan.
principle 2.7.5 of the Dutch Code.
There are no restrictions on the transferability of the shares in the
The Relationship Agreement provides that:
Articles of Association or under Dutch law.
a) for so long as the ITBV Affiliates hold, in aggregate, more than
30% of the voting rights of the Company, the ITBV Affiliates will
Lock-up arrangements
jointly be entitled to nominate three Non-Executive Directors to
Independent Non-Executive Director
the Board. This nomination right is reduced to two Non-
In respect of work undertaken by them in relation to and in
Executive Directors when the ITBV Affiliates hold, in aggregate,
preparation for roles as Board members, in the period prior to
less than 30% of the voting rights of the Company. This
the Company’s listing on the WSE one-off fees were paid to
nomination right is further reduced when the ITBV Affiliates hold,
Richard Burrows, Brendan Connolly, María Fernanda Mejía,
in aggregate, less than 20% of the voting rights of the Company.
Grazyna Piotrowska-Oliwa and Pierre Bouchut which were used by
If the ITBV Affiliates hold, in aggregate, less than 10% of the
these individuals to subscribe for shares in the Company on
voting rights of the Company, they will no longer have the
admission to the WSE (at the admission offer price).
entitlement to nominate any members of the Board;
Shares acquired by these Board members on admission must be
b) subject to compliance with applicable laws and regulations,
held until the later of: (i) 26 May 2024; or (ii) the first anniversary of
including the Market Abuse Regulation, the Company will:
the date on which the relevant Board member ceases his or her
i. provide certain information to the ITBV Affiliates to enable the
directorship of the Company. Richard Burrows stepped down as
ITBV group of companies to fulfil its regulatory and legal
Non-Executive Director and Chair of the Board following the
obligations and to facilitate the preparation of the accounts
conclusion of the AGM on 2 February 2023. On 25 May 2024, the
of the ITBV Affiliates and connected enterprises for so long as
shares held by Richard Burrows were released from the
such provision is reasonably required by generally applicable
lock-up provisions.
accounting principles; and
ii.provide reasonable assistance and access to Company
management in connection with any planned disposal of
shares in the Company that are held by the ITBV Affiliates;
69
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Audit Committee report
Providing oversight and
promoting integrity
Dear Shareholders,
On behalf of the Audit Committee, I am delighted to present the
Committee’s report for the year ended 30 September 2024.
This marks my first report since joining the Board and being
appointed Chair of the Audit Committee in June 2024, after Pierre
Bouchut stepped down from his role both as an independent
Non-Executive Director and as Audit Committee Chair at the
AGM in March 2024. On behalf of the Audit Committee, I would
like to express our gratitude to Pierre for his three years of service
as Chair and for his commitment and contribution to the Group as
a whole. In March 2024, The Committee also welcomed Sean
Mahoney to its ranks, contemporaneous with his appointment as
a Non-Executive Director.
My onboarding as Chair of the Committee has been greatly
facilitated by the Committee, who have spent many hours
acquainting me with the details of the Company’s accounting
judgements, control environment, and financial and control
processes. I have engaged in in-depth discussions with the
Company’s external auditors, our finance team and our internal
audit team. These included a review of the Group’s internal and
management controls, risk framework and the charter and
effectiveness of the internal audit function, which now reports
directly to me. In addition, I have participated in a wide range of
excellent initiatives already underway well before my arrival,
including, of particular importance to me, the adoption of a new
Frederick Arnold
Group Accounting Policy Manual, together with the Group-wide
Audit Committee Chair
harmonisation of the chart of accounts and policies and
procedures for various accounting provisions and judgements.
Finally, I have undertaken a diverse range of specific workstreams
including a review of the accounting treatment for our
discontinued operations in Austria, the assessment of goodwill
and impairment related to Poundland, our foreign currency
hedging processes, and the investigation related to last
February’s fraud in Hungary, among others.
As to our internal functions, the Group is continuously improving
these areas and it is very much worth noting the addition in FY24
of a new Group Financial Controller and a new Group Senior Risk
Manager focused on our enterprise risk management programme,
who complement our new Head of Internal Audit who joined at
the tail end of FY23.
This report sets out the ongoing responsibilities and objectives of
the Committee and provides an overview of the main activities
during FY24, the highlights of which are set out below.
I am particularly pleased that the Committee has an open and
constructive relationship with management, with the internal audit
function and with our external auditors, whom I thank for their
assistance over the year. I would also like to thank my fellow
Committee members for their diligence and engagement during
the year. I look forward to continuing our work in FY25.
Frederick Arnold
Audit Committee Chair
20 December 2024
70
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Role of the Audit Committee
The formal role of the Committee, as delegated by the Board, is
Committee membership and meetings
set out in written terms of reference, which are reviewed annually
The Committee concluded the year with five members, with
by the Committee and are available on our website.
a minimum requirement of three members constituting a
The Committee’s responsibilities include, but are not limited to,
quorum. The Committee must have at least one member
the following matters:
with recent and relevant financial experience, and the
Committee as a whole shall have competence relevant to
•
financial and sustainability reporting and compliance with
the sector. The Board is satisfied that all Committee
relevant accounting standards and other legal and regulatory
members have the required experience to enable the
requirements;
Committee to fulfil its duties. Committee member
•
reviewing the Group’s accounting policies and, in particular,
biographies and attendance at meetings during the year
any major accounting issues of a subjective nature are
are set out on pages 62 to 66. Three members of the Audit
discussed by the Committee;
Committee are considered to be independent Non-
Executive Directors within the meaning of the Dutch Code
•
reviewing the Group’s half-yearly and annual financial
and Warsaw Code (Frederick Arnold, María Fernanda Mejía
statements (including clarity and completeness of disclosure)
and Brendan Connolly) and two members are not
and the quarterly trading updates;
considered to be independent Non-Executive Directors
•
providing oversight of the Group’s internal control and risk
(Sean Mahoney and Neil Brown) due to their relationship
management systems and considering reports on their
with our major shareholder.
effectiveness from the Group CFO, Group Financial Controller
At the invitation of the Chair of the Committee, the Chair of
and Group Head of Internal Audit;
the Board, the Group CEO, the Group CFO and the external
•
assisting the Board with the development and execution of the
audit lead partner from Forvis Mazars are invited to attend
risk management strategy, risk policies and current risk
all Audit Committee meetings. The Company Secretary acts
exposures, including maintenance of the Group’s risk register;
as secretary to the Committee.
significant risk issues are referred to the Board for consideration;
Other regular attendees include the Group Financial
•
reviewing ESG strategies, reporting, goals and targets,
Controller and the Group Head of Internal Audit; in addition,
monitoring progress and advising the Board as appropriate;
the Group Treasurer, Head of Tax, Group Chief Information
Officer, Head of Sustainability, Group Chief Compliance
•
monitoring the scope of work, quality, effectiveness and
Officer (including whistleblowing) and Head of Group
independence of the external auditors and recommending to
Reporting are invited to attend all or part of any meetings
the Board their appointment, reappointment and fees; and
and are available to meet on a one-to-one basis as and
•
reviewing the engagement of the external auditors to ensure
when required to support the Audit Committee fulfilling its role.
that the provision of non-audit services by the external audit
At the conclusion of each meeting, Forvis Mazars and the
firm is in accordance with the Group’s policy which seeks to
Group Head of Internal Audit invariably are each given the
ensure that their independence is not impaired.
opportunity to discuss matters with the Committee without
management being present. Similar private sessions are
regularly held with our Group CFO, with our Group Financial
Controller and with our Head of Financial Reporting, among
others.
The Audit Committee has a schedule of regular, structured
meetings throughout the year, but meets as often as is
required for its proper functioning and to respond to
matters requiring oversight as they arise. The timing of
meetings is agreed in advance and set to accommodate a
regular cadence of matters and key dates in the financial
calendar and, on behalf of the Board, to provide oversight
of the Group’s risk management and internal control
processes. In addition to the regular scheduled meetings,
the Committee consults with our external auditors, advisors
and management on an ad hoc basis.
R Details of attendance of all Board and Committee meetings by
Directors are set out on page 66.
71
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Audit Committee report continued
Key judgements and financial reporting matters
The Committee continually assesses the ongoing effectiveness
and quality of the external auditor and the audit process, which
Financial statements
includes discussing details of the audit process with our senior
The financial statements are prepared in accordance with
financial team, the auditors, and a variety of staff throughout the
Dutch law, and the audit of the Group’s financial statements is
organisation. We seek and encourage feedback from the
performed by Forvis Mazars.
members of the Committee and stakeholders at all levels across
Prior to their publication, the Committee reviews the quarterly
the Group on our auditors’ objectivity, appropriate mindset and
trading updates, the interim results announcement and financial
professional scepticism.
statements, the Annual Report and associated results
Audit of the annual accounts
announcement, together with the external Auditors' report.
Forvis Mazars are engaged to express an opinion on the financial
In particular, in FY24, the Audit Committee considered the
statements. The Committee held independent meetings with the
following in relation to the financial statements:
external auditors during the year and reviewed, agreed, discussed
and challenged their proposed FY24 audit plan, including the
•
the accounting principles, policies and practices adopted
materiality applied, their scope, and their assessment of the
and the adequacy of related disclosures in the reports;
financial reporting risk profile of the Group.
•
the significant accounting issues, estimates and judgements
The Committee discussed the views and conclusions of Forvis
of management in relation to financial reporting;
Mazars regarding audit and accounting matters, together with
•
whether any significant adjustments were required as a result
management’s treatment of significant transactions and areas
of the audit;
of judgement during the year. The Committee considered these
•
the assessment of goodwill and, in particular, the procedures
and is satisfied with the treatment in the financial statements.
performed by management to assess whether goodwill
Independence and objectivity
recognised on the purchase of Poundland should be impaired;
The Committee is responsible for the annual assessment of the
•
the classification of Pepco Austria as a discontinued operation;
external auditors’ independence, taking into account the Group’s
relationship with the auditors' as a whole, including any threats to
•
the classification and presentation of non-underlying items;
the auditors' independence and the safeguards applied to
mitigate those threats including the provision of any non-audit
•
the restatement of prior year balances;
services.
•
compliance with statutory tax obligations;
Auditor independence is maintained by reviewing Forvis Mazars’
•
whether the information set out in the Annual Report and the
and PwC’s confirmation of their independence and their
financial statements are fair, balanced, comprehensive, clear,
procedures to safeguard independence and objectivity and
and understandable and covered both positive and negative
monitor the nature and value of non-audit services performed.
aspects of performance; and
Audit fees and non-audit services
•
whether the use of APM obscured IFRS Accounting Standards
Payments made to Forvis Mazars in the financial year ended
measures.
30 September 2024 for audit, audit-related and other services
Going concern
are set out in note 5 to the consolidated financial statements.
The Committee assessed and confirmed the appropriateness of
The Group’s policy prevents the external auditors from providing
adopting the going concern basis of accounting in preparing the
any services designated as prohibited within the Dutch Code or
Annual Report and Consolidated Financial Statements. The
the Warsaw Code and requires Committee approval of their
Committee considered the Group’s liquidity and available credit
provision of any other services regardless of their magnitude. Any
facilities, including the revolving credit facility, and reviewed the
non-audit services will be subject to tender processes, with the
liquidity impact of a severe, but plausible, management downside
allocation of work made on the basis of competence, cost
scenario.
effectiveness, regulatory requirements, potential conflicts of
interest, and knowledge of the Group’s business. Non-audit fees
True and fair view
paid to our external auditors as a percentage of audit fees
At the request of the Board, the Committee considered whether
totalled 7.8% over the last three years.
the financial statements and the elements of the Annual Report
that are relevant to the financial statements, as a whole, is fair,
balanced and understandable and whether it provides the
Risk management and internal controls assurance
necessary information to shareholders to assess the Group’s
Risk management systems
position, performance, business model and strategy.
The Board has overall responsibility for oversight of individual risks
and ensuring that the Group maintains a sound system of internal
To form its opinion, the Committee reviewed the financial statements
control. There are inherent limitations in any system of internal
set out in the Annual Report and interim results, together with
control and no system can provide absolute assurance against
management and the external auditor’s assessment of items
material misstatements, loss, or failure. Equally, no system can
included in the financial statements and the prominence given
guarantee elimination of the risk of failure to meet the objectives
to them. The Committee, and subsequently the Board, is satisfied
of the business. The Board delegates oversight responsibility for
that, taken as a whole, the Annual Report and Consolidated
risk to the Audit Committee.
Financial Statements is fair, balanced, and understandable.
Against that background, the Committee reviewed the Group’s
External auditors
overall approach to enterprise risk management and control, and
its processes, outcomes, and disclosure. The Audit Committee has
Forvis Mazars have been the Group’s auditors since the financial
approved the rollout of an enterprise risk management approach
year ended 30 September 2021 and, at our AGM in March 2024,
across the business in 2025, building on the team’s progress in 2024.
shareholders approved their reappointment as the Group’s
external auditors for the financial year ended 30 September 2024.
The Group is proactive in ensuring that Group and operational
The partner responsible for the Group audit opinion is Onno
risks are consistently identified and managed within each
Opzitter.
operating company. In addition, the Group risk appetite is
Forvis Mazars use PwC as component auditors in several countries
regularly assessed and our risk register is maintained with
to perform the work on local entities. Forvis Mazars review all of
attention to:
the auditors’ audit files and are involved throughout the audit
•
the risks and the impact they may have;
process in accordance with ISA auditing standard 600.
72
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
•
actions to mitigate risks; and
governance by providing valuable insights and recommendations
that would help safeguard the organisation’s assets, reputation,
•
ownership of risks.
and sustainability.
A description of the key risks is set out on pages 52 to 58.
The Internal Audit Charter was approved by the Committee in
The Board has confirmed that it has conducted an assessment
October 2023 and updated in September 2024. This defines the
of the principal risks facing the Group, including those which
purpose, authority, and responsibility of the function within the
threaten its business model, future performance, solvency or
organisation and establishes its independence and authority. The
liquidity. The Board considers that the processes undertaken by
governance structure of the internal audit function was reviewed
the Committee are appropriately robust and effective.
in FY24. To ensure the independence of the function and that it
remains objective in its evaluations, the Group Head of Internal
Internal control framework
Audit reports functionally to the Audit Committee Chair and
During the year, the Board has not been advised by the
organisationally to the Group CFO.
Committee of, nor has it identified itself, any failings, fraud, or
weaknesses in internal control which it has determined to be
The Group Head of Internal Audit informs the Group CFO and the
material in the context of the financial statements, other than as
Audit Committee Chair without delay if, during the performance of
described below.
its duties, the function discovers or suspects an instance of
material misconduct or irregularity. If the actual or suspected
As reported on 27 February 2024, The Group was the target of
material misconduct or irregularity pertains to the functioning of
a sophisticated fraudulent phishing attack in its Hungarian business,
one or more of the Executive Directors, the internal audit function
resulting in a loss of approximately €15.5m in cash. The investigation
reports this to the Chair of the Board of Directors. Records are
into the fraud by various national and international authorities,
kept of how the Committee is informed by the internal audit function.
including the pursuit of any potential recovery, is ongoing. The
Company has also undertaken a full investigation including a review
The Committee reviewed the FY25 Internal Audit Plan and
of its phishing training and procedures throughout the Group, which
approved a risk-based approach to audit planning, focusing on
have been fully re-communicated throughout the business with
the areas of highest risk to the organisation. The Committee
mandatory assessments.
reviewed and discussed the quarterly internal audit reports,
assessing the results of audit activities, together with the
Additional actions have also been taken to strengthen cash and
completion status of agreed actions. The Committee oversees in
other controls across the business based on specific learning from
detail the design and ownership of processes to resolve
this incident. This included engaging external forensic specialists to
outstanding issues or actions.
leverage industry best practice and subject matter expertise and
During the year, the Committee or Committee Chair met
initiating a comprehensive analysis of balance sheet positions. This,
frequently with internal audit without executive management
together with a review of the accounting policies across the Group,
being present and discussed the results of the audits performed
identified some instances of non-compliance with procedures and
and any additional insights of the Group Head of Internal Audit.
accounting rules in some of the historical accounting, including
related to supplier discounts, although the financial impact was not
Internal audit effectiveness
material. Any issues identified were remediated and corrected as
During the year, the internal audit team performed an
part of year-end reporting.
effectiveness self-assessment against compliance with Dutch
The Committee continues to promote and support the ongoing
Code and Warsaw Code requirements. Based on this we are
strengthening of controls throughout the Group and believes that
compliant with all internal audit requirements in the Dutch
the Group has a well-defined organisational structure with clear
Code and all but one Warsaw Code requirement (which states
lines of responsibility and a comprehensive financial reporting
best practice is for no compensation for internal audit or
system including internal audit reporting to the Committee.
compliance teams to be based on company results, while
noting that all variable compensation is based on achieving
Regulation
minimum financial targets).
The Group operates within an increasingly regulated environment,
including regulations concerning controlling bribery and
The internal audit self-assessment confirms that the function is
effective in fulfilling its core responsibilities. The assessment
corruption, the importation of goods, data protection, and health
highlights significant improvements made in the past year and
and safety. The Group endeavours to comply completely with all
several areas of focus for FY25. There is confidence that the Group
such regulations and strives to continuously improve our
internal audit function will continue to evolve, maintaining its
Compliance function. For example, to that end, in FY24 we
effectiveness whilst better serving the needs of our stakeholders
refreshed all our relevant policies and brought into the Group a
new Chief Compliance Officer based in Hong Kong.
and contributing to the organisation’s success.
Policies and compliance
Environmental, social and governance (ESG)
On an annual basis, the Committee reviews the Group’s Treasury
The ESG strategy is set at Group level and pulls together the
Policy (covering risk management, treasury governance and
ESG plans and actions of our operating companies. Within the
internal controls, systems and practices) and Tax Strategy, and
business, ESG actions and initiatives are directed and prioritised
receives reports to confirm compliance with the policies.
by an ESG Committee, which is chaired by the Group CFO and
The Group has policies and processes in place for whistleblowing
meets monthly to review progress. The Audit Committee
and the Committee encourages an environment where
reviews ESG strategies, goals and targets, and monitors progress
colleagues have the opportunity to raise concerns about possible
on a quarterly basis, advising the Board as appropriate.
fraudulent activity and any other concerns that arise within the
We continue to monitor that the Group is compliant with ESG
organisation. Following the developments discussed on Page 50
regulatory reporting requirements today and in the future and
the Committee is also satisfied that arrangements are in place for
keep ourselves updated on the changing regulatory requirements
proportionate investigation of such matters, including appropriate
in this area, for example reporting according to the ESRS for the
follow-up action.
first time in FY25, as noted on page 35. A quarterly ESG report is
provided to the Audit Committee providing an update on the ESG
Internal audit
goals, the carbon emissions roadmap, and the net zero transition
As alluded to above, following an external search process, the
strategy 2050 cost projections.
Committee appointed a new Group Head of Internal Audit and
R For further information on the Group's approach to ESG, please see
established the Group internal audit team in Q4 of FY23. The team
our report on pages 49 - 51.
was developed in FY24 with a key objective to strengthen
73
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Nomination Committee report
Shaping Board
excellence
Dear Shareholders,
On behalf of the Nomination Committee, I am pleased to present
our FY24 Committee report. I would like to thank the members of
the Nomination Committee for their continued support and hard
work during the financial year. We have managed change at the
most senior level of the business in FY24 and can look forward to
further progress in FY25.
Key area of focus in FY24
The Committee’s principal focus for FY24 has been the appointment
of our new CEO, Stephan Borchert, the appointment of Frederick
Arnold as a Non-Executive Director and Audit Committee Chair,
the appointment of Sean Mahoney as Non-Executive Director, the
externally led Board evaluation and the further development of
our succession plan, as outlined below.
In addition, we have:
•
recommended to the Board revisions to the policy on diversity
and inclusion (the D&I Policy);
•
reviewed and approved the structure, size and composition of
the Board;
•
approved the Directors’ Retirement Schedule;
•
reviewed and approved the Board Committees’ membership; and
•
approved updated Nomination Committee terms of reference.
María Fernanda Mejía
Nomination Committee Chair
Talent and succession
The Committee recognises that having the right Directors and
senior management, with the right capabilities, experience and
industry knowledge, is fundamental to the Group’s long-term,
sustainable success. Accordingly, the Committee has dedicated
significant time and resources to enhancing succession planning
and building on the talent currently in the business.
CEO appointment
An important part of our work this year was the appointment of
our new CEO, Stephan Borchert. The Committee worked with an
external search firm to identify and interview suitable CEO
candidates from across the retail sector, including an in-depth
selection process to ensure the candidate recommended to the
Board had the right expertise to fulfil the role. The Committee
oversaw the preparation and implementation of Stephan’s
tailored induction programme, capturing the priorities of the
Group. The programme provided insight to the business
operations, governance and controls, and included an
opportunity to meet colleagues across the Group. We would like
to thank Andy Bond for returning to an executive leadership role
and acting as Executive Chair during FY24, as well as for his
guidance during Stephan’s three-month induction period.
Audit Committee Chair appointment
One of the key responsibilities of the Committee is to consider the
skills, knowledge and experience of prospective candidates. In our
search for an Audit Committee Chair, a detailed role specification
was prepared by the Committee and an external search firm was
appointed to lead the process to identify potential candidates.
The appointment followed a thorough process to ensure the
candidate would help meet the strategic ambitions of the
business. We welcomed Frederick Arnold as an independent
74
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Board evaluation
Non-Executive Director of the Board and as Audit Committee
Chair following his appointment at the EGM on 6 June 2024.
One of the roles of the Committee is to oversee the Board
evaluation process, which for FY24 was externally facilitated.
Succession planning
The key areas of focus for the review were: role, responsibilities
The Committee dedicated time to ongoing succession planning.
and performance of the Board and its individual members. This
We reviewed the adequacy and effectiveness of the succession
evaluation was made through in-depth one-on-one interviews
planning processes. The Committee oversaw management’s
with all the Directors. The findings were presented back to the
"Talent and Succession Strategy", recognising the need to focus
Board during an externally led session. Key strength areas were
on enhancing senior leadership and to manage the available
identified including Board culture and contribution and the
talent pool within the Group. This has resulted in a clearer
effective use of time and information. The report also identified
understanding of talent and skills within the business and a
opportunities for Board development, including the successful
stronger pipeline for succession.
induction of the incoming CEO, the evolution of Board
composition and its approach to succession planning.
The Committee has prepared an action plan which it will review
Committee composition and organisation
and track progress against this evaluation through FY25.
Our Committee comprises six members, each of whom is a
Non-Executive Director of the Company. On 2 October 2023
Profile of the Board
Andy Bond stepped down as interim Chair of the Committee
The Board has prepared a profile of its size and composition,
and María Fernanda Mejía was appointed by the Board as
taking into account the nature of the business and its relevant
the new Chair of the Committee. The Committee is delighted
activities. The combined experience, expertise, background
that Sean Mahoney was appointed as one of its members
and independence of the Board members enables the Board to
following his appointment as Non-Executive Director at the
carry out its duties and responsibilities effectively in relation to
EGM held on 6 June 2024.
the Company and its stakeholders.
The Committee currently consists of Brendan Connolly, Paul
The appointments of Brendan Connolly, Grazyna Piotrowska-Oliwa,
Soldatos, Neil Brown, Sean Mahoney, Andy Bond, and María
Frederick Arnold and me to the Board comply with the independence
Fernanda Mejía. Brendan Connolly and María Fernanda
requirements of the Dutch Code and the Warsaw Code. The
Mejía are independent Non-Executive Directors within the
appointments to the Board of Neil Brown, Sean Mahoney and Paul
meaning of the Dutch Code and the Warsaw Code. The
Soldatos comply with the terms of the Relationship Agreement.
other four members of the Committee are Non-Executive
Directors who are not considered to be independent. The
Diversity and inclusion
Company Secretary acts as secretary to the Committee.
The Company has a D&I Policy, which underscores the
commitment to promoting equality, diversity and inclusion for both
The Committee has a strategic work plan and meets at
the Board and the senior leadership team. A diverse and inclusive
least three times a year and otherwise as required.
workplace continues to be a priority for the Board and the
Committee meetings are scheduled in advance. The
Committee. Please see pages 65 and 66 of the corporate
quorum for the transaction of business by the Committee is
governance section for more information.
two members. The Committee makes recommendations to
the Board on any area within its remit that it deems appropriate.
Key areas of focus for FY25
The Committee, together with the Board, will continue to support
and encourage the leadership of the Group to ensure its
Key responsibilities
continued long-term growth and success. The Committee will
The Committee’s main duties are:
focus on the following priorities in the forthcoming year:
•
to lead the process for Board appointments including
•
ensuring a smooth and effective transition for our new CEO;
selection criteria and appointment procedures;
•
continued focus on expertise and skills of key leaders in
•
to review the structure, size, and composition of the Board;
the business;
•
to make recommendations to the Board on the profile of
•
reviewing the evolution of Board composition and effectiveness;
the Board;
and
•
•
to make recommendations to the Board on the D&I Policy;
continued focus and monitoring of the risk and control environment.
•
to manage succession planning for the Board and senior
Executives of the Company; and
María Fernanda Mejía
•
to review the Board evaluation process.
Nomination Committee Chair
20 December 2024
The Committee held six meetings during the year. More
detail on the role and duties of the Committee can be
found in the terms of reference for the Committee, which
are published on the Company’s website.
75
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Remuneration Committee report
Rewarding
performance
Dear Shareholders,
I would like to thank you for your continued support in 2024 during
which time we have faced many changes as a business. We
amended our Remuneration Policy at the AGM in March 2024 to
further align with our strategy and have continued to operate
within this policy during 2024. As a Dutch company listed on the
WSE we have multiple reporting requirements which we have
chosen to supplement with additional information. The
Remuneration report on pages 79 to 83 will be presented for an
advisory vote at our next AGM.
Introduction
The Remuneration Committee's purpose is to develop a reward
package for Executive Directors and senior leadership that
supports the Company's vision and strategy, and to ensure that
rewards are performance based, encourage long-term
shareholder value creation and take into account the
remuneration of the whole workforce. More detail on the role and
duties of the Committee can be found in the terms of reference on
the Company's website.
Brendan Connolly
Remuneration Committee Chair
76
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Committee activities in FY24
During the reporting period, the Committee focused on the areas
Committee composition
as set out below:
The Committee comprises five members, each of whom is a
Non-Executive Director of the Company. Three members
•
reviewed remuneration for the Executive Directors and selected
constitutes a quorum. Frederick Arnold, Grazyna
senior Executives;
Piotrowska-Oliwa and I are members of the Committee who
•
reviewed and approved salary levels for the Executive Directors
are independent Non-Executive Directors within the
and selected senior Executives;
meaning of the Dutch Code and Warsaw Code. Paul
Soldatos and Neil Brown are not considered to be
•
reviewed and approved the terms of the restricted share
independent. The Chair of the Board may not be a member
awards made to executives in place of the Company’s VCP;
of the Remuneration Committee. The Company Secretary
•
reviewed and approved the remuneration package for our
acts as secretary to the Committee. Other individuals,
incoming CEO;
including senior Executives and external professional
advisors to the Committee, may be invited to attend when
•
reviewed and approved the introduction of the Share Match
appropriate and necessary. No individual will be present
Plan along with the performance measures and targets in
when their own remuneration is discussed.
relation to the award for the newly appointed CEO;
The Remuneration Committee meets at least three times
•
reviewed and agreed the terms for the awards for Executives
each year and is responsible for preparing the decision
in the Group Long Term Incentive Plan (LTIP);
making of the Board on the remuneration of members of the
•
reviewed and approved performance against FY24 Short-Term
Board and selected senior Executives.
Incentive Plan (STIP) targets for the Executive Directors;
The Committee is also responsible for reporting to the
•
reviewed and approved the FY24 STIP measures, weightings
Board on the implementation of the Remuneration Policy in
and targets;
each year in the context of the achievement of the
Company's long-term strategy and objectives.
•
reviewed and approved appropriate measures, weightings
and targets for the Group LTIP for the FY25 award;
•
considered workforce remuneration approach and policies;
•
considered the Executive remuneration market update
Responsibilities
provided by the Committee’s advisors;
The main duties of the Remuneration Committee are
•
reviewed and approved the terms of reference to ensure
as follows:
alignment with the Dutch Code and Warsaw Code;
•
to recommend to the Board the Remuneration Policy
•
updated the Remuneration Committee's terms of reference;
of the Company;
•
reviewed Executive Directors’ shareholdings against
•
to advise on and recommend to the Board the
shareholding requirements;
remuneration framework for the Executive Directors
•
reviewed the 2024 AGM shareholder and proxy voting
and selected senior Executives and to advise the AGM
agency feedback;
on the remuneration of the Non-Executive Directors;
•
•
considered alignment of Executive pay with Company
to advise on the structure of target setting for
culture; and
performance-based incentive plans of the Company,
including monitoring performance against any targets;
•
reviewed and approved the Remuneration Report.
•
to review all share incentive plans for approval by the
Board and shareholders; and
•
to prepare the Remuneration Report.
77
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Remuneration Committee report continued
Board changes
The FY25 PSP plan will consist of: adjusted EPS (45%), a ROIC
measure (45%), which is the same as reported in the financial
Incoming CEO
section of the Annual Report, and 10% for the same ESG measures
Stephan Borchert was appointed as an Executive Director and
as 2024 with adjusted and more challenging targets.
CEO with effect from 1 July 2024. He commenced with a three-
month induction allowing for a smooth transition from Andy Bond’s
As mentioned above, we introduced a Share Match Plan which
interim period as Executive Chair which commenced in September
was approved at the EGM held in June 2024.
2023. Andy Bond remained in his role as Executive Chair during the
Long Term Incentive Plan
transition period, reverting to the role of Non-Executive Chair on
1 October 2024.
At the AGM held in January 2022 we received support for the
introduction of a new LTIP. Until the VCP concludes, the new LTIP
On appointment to the Board, Stephan’s salary was set at
is intended to be used alongside the VCP for senior Executives.
£900,000 with a pension allowance of 13% of his salary. Some
Chair and Non-Executive Director fees
assistance for living expenses and relocation was granted for
eighteen months. Stephan is eligible for a maximum bonus of 150%
Non-Executive Director fees are the remit of the Chair and CEO,
of salary and a Group LTIP award of 300% of salary. In addition,
and an amended scale of payment was put in place for all
independent Non-Executive Directors. The Chair fee, which is the
Stephan will also participate in the Share Match Plan allowing
remit of the Remuneration Committee remains the same for FY25.
him to invest up to two times his annual salary in shares in the
Company. In return the Company will award matching shares.
As disclosed in last year’s report Andy Bond took on the role of
Executive Chair until our new CEO completed his induction period
Remuneration outcomes in FY24
on 1 October 2024; therefore, Andy has reverted from his base
In terms of remuneration outcomes in FY24, Andy Bond and Neil
salary of £835,000 in relation to the Executive Chair role to his
Galloway did not receive salary increases. Stephan Borchert
Chair’s fee of £400,000. He will retain his 1.0% participation right
and Neil Galloway received a pension allowance of 13% of salary.
in the VCP.
Andy Bond did not receive a pension allowance.
Alignment to Group strategy
The STIP (bonus plan) for the Executive Directors consisted of
To ensure alignment to Group strategy, summed up as profitable
a financial goal of €517m for the Group's underlying EBITDA
and share price growth in a sustainable manner, we have centred
delivery on an IAS 17 basis, representing 80% of the annual bonus
the targets around these themes in the various long-term and
opportunity, with the balance based on achieving strategic
short-term incentives.
goals. The strategic goals comprised of LFL growth targets,
strategic plans for specific areas, defining the ERP strategy and
Conclusion
implementation, organisational changes, and implementing a
In summary, in FY24 we have continued the move towards a
supplier financing plan.
more standardised and recognisable structure of STIPs and
Bonus plan
LTIPs as outlined in last year’s report. The move away from the
VCP has continued with only one participant remaining.
Following an assessment by the Committee of the personal
contributions during the year of the Executive Directors, the
After due consideration and debate, we believe the remuneration
following cash bonuses have been awarded.
outcomes to be fair in terms of alignment to the stakeholder
•
Andy Bond received a cash bonus of £821,640.
experience and, no discretion was applied. I would like to thank
the Committee for their work, debate, and input during the year
•
Stephan Borchert received a pro-rated cash bonus of £221,400
and look forward to interacting with our stakeholders in the
for the three months between 1 July and 30 September,
forthcoming year.
based on the same goals as Andy Bond.
•
Neil Galloway received a cash bonus of £617,400.
Brendan Connolly
For FY25, the maximum bonus opportunity for the CEO and
Remuneration Committee Chair
CFO will remain at 150% of salary and the bonus opportunity will
20 December 2024
continue to be divided into 80% for underlying Group EBITDA
on an IAS 17 basis and 20% for strategic goals. This financial
performance metric is aligned with senior management’s bonus
plan. Due to the commercial nature of the targets these will be
published in the FY25 Annual Report.
Value Creation Plan
We had previously mentioned that the VCP was being phased out
in favour of the LTIP (Performance Share Plan (PSP)) with only one
remaining individual in the VCP being our Chair, Andy Bond. The
plan is capped at €14m and concludes in FY26.
The PSP was originally approved at the AGM held in January 2022.
The plan was introduced for the first time FY24 so as yet we do not
have any outcomes for this plan. The CEO and CFO are eligible for
300% and 250% respectively.
The PSP awarded in 2024 consists of the following targets: an IAS17
EBITDA less net debt measure (60%), an EBIT measure (30%)
and ESG targets of a 10% reduction in Scope 1 and 2 emissions
and 100% coverage for factory audits.
78
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Remuneration report
The following section provides details of how Board members were paid during the financial year to 30 September 2024.
The Remuneration Committee members, activities and meetings during the year are set out on pages 62 and 66 along with the
Committee’s purpose, roles and responsibilities, and are thereby included in this part of the report by reference.
The Remuneration Committee took scenario analyses into account when initially setting the Remuneration Policy and continues to take
them into account when operating the Remuneration Policy. Payout opportunities in different scenarios were conducted when setting
remuneration. None of the Directors received any remuneration from entities within the Group other than as disclosed in this report. The
Remuneration Committee did not deviate from the Remuneration Policy in the year.
No concerns or issues were raised with respect to the advisory vote of the AGM approving the 2023 Remuneration Report.
Advisors
Korn Ferry is a signatory to the UK Remuneration Consultants Group Code of Conduct (the Code of Conduct) and was appointed by the
Remuneration Committee in 2021 having submitted a proposal which demonstrated its skills and experience in executive remuneration
both in the UK and across Europe. Korn Ferry provides advice to the Committee on matters relating to Executive remuneration.
The Committee was satisfied that the advice provided by Korn Ferry remains objective and independent, having noted its commitment
to the Code of Conduct.
Single total figure of remuneration table
Salary/
Taxable
Total fixed
Total variable
fees
benefits
Pension
Bonus
LTIP
Other
Total remuneration remuneration
remuneration
€
€
€
€
€
€
€
€
€
€
€
€
€
€
€
€
€
€
FY24
FY23
FY24
FY23
FY24
FY23
FY24
FY23
FY24
FY23
FY24
FY23
FY24
FY23
FY24
FY23
FY24
FY23
Executive Directors
Andy Bond 976,432 327,335 4,852
9,659
—
—
960,809
— 2,881,008
—
—
— 4,823,101 336,994 981,284 336,994 3,841,817
—
Neil
Galloway
701,628 344,610 27,082
8,937 91,212 44,799 721,975 689,220
—
—
—
— 1,541,896 1,087,566 819,921 398,346 721,975 689,220
Stephan
Borchert
263,111
—
83,656
—
34,204
—
258,901
—
—
—
643,915
— 1,283,786
—
380,971
—
902,815
—
Trevor
Masters
78,380 731,423
—
48,148
—
133,869
—
—
—
3,115,308
—
625,109
78,380 4,653,857 78,380 913,440
—
3,740,417
Non-Executive Directors
Brendan
Connolly*
113,284 89,024
—
—
—
—
—
—
—
—
—
—
113,284
89,024 113,284 89,024
—
—
Frederick
Arnold
55,058
—
—
—
—
—
—
—
—
—
—
—
55,058
—
55,058
—
—
—
Grazyna
Piotrowska-
Oliwa
86,534 71,219
—
—
—
—
—
—
—
—
—
—
86,534
71,219 86,534 71,219
—
—
Helen Lee
Bouygues
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
María
Fernanda
Mejía
104,075 71,219
—
—
—
—
—
—
—
—
—
—
104,075
71,219 104,075 71,219
—
—
Neil Brown
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Paul
Soldatos
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Pierre
Bouchut*
46,044 89,024
—
—
—
—
—
—
—
—
—
—
46,044
89,024 46,044 89,024
—
—
Sean
Mahoney
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
*
FY24 Committee Chair.
** Pierre Bouchut resigned as Chair of the Audit Committee on 15 March 2024. Frederick Arnold was appointed as Chair of the Audit Committee on 6 June 2024.
Notes to the table
1
Stephan Borchert was appointed as permanent CEO with effect from 1 July 2024. His remuneration in the table is pro-rated for the proportion of the year in which he
performed the role.
2
Andy Bond has not formally been appointed as an Executive Director, but for the purpose of comprehensive disclosure, his remuneration will be expressed as an
Executive Director in order to reflect his Executive Director duties within his Executive Chair role. Andy was appointed Chair on 2 February 2023, before becoming
Executive Chair on 12 September 2023 and returning to his role as Chair on 1 October 2024. Andy’s fees for FY24 are therefore reflective of the salary he received as
Executive Chair of £835,000. Andy did not receive any payments under the annual bonus plan during his time as Chair.
3
Andy Bond did not receive a separate pension payment within his role of Executive Chair. Stephan Borchert pension is in the form of a cash equivalent payment.
Neil Galloway’s pensions is split, part contribution to a pension scheme, and part cash equivalent payment.
4
Salary/fees, taxable benefits, and bonus are all short-term employee benefits.
5
The Company has not revised or clawed back the remuneration of any Directors in the year.
6
No loans, advances or guarantees have been provided to any Director.
7
Neil Brown, Helen Lee Bouygues, Paul Soldatos and Sean Mahoney did not receive payment from the Company in FY24.
8
"LTIP" in respect of Andy Bond relates to 600,000 unexercised share options vested under the Chair Award in FY24 at a closing share price of 20.52 PLN.
9
"Other" remuneration in respect of Stephan Borchert includes a single payment in relation to a forfeited bonus from a previous role prior to joining the Company.
10 Trevor Master’s received salary from the period 1 September 2023 to the termination date 12 October 2023.
79
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Remuneration report continued
FY24 annual bonus performance against targets
As discussed in the Remuneration report, 80% of the maximum payout is conditional upon the delivery of the Group’s EBITDA target and
20% is conditional upon strategic KPIs. Given the EBITDA outcome on an underlying IAS17 basis at constant currency this has resulted in a
payment of 68.2% of the maximum in relation to this element. Andy Bond was eligible for a bonus in FY24 in his role as Executive Chair. Neil
Galloway received a bonus for the full year and Stephan Borchert received a pro-rated bonus for the period he was in role of CEO from 1
July 2024.
Directors’ share option plans in Pepco Group
The table below details outstanding share awards previously granted to the Executive Chair and the current CFO. Save for Andy Bond,
no share awards have been granted to the Non-Executive Directors.
Share
Share
Share
Share
awards
awards
awards Total share
price
held at
Awarded
Vested
lapsed
held at
value at
Award Exercise
used
30 Sept during the during the during the
30 Sept
award Vesting
Exercise
Scheme
date
price
(PLN)
2022
year
year
year
2024
(EUR)
date
period
Andy Bond
VCP 14/2/22
Nil
46.35 2,389,162
—
—
—
2,389,162 24,119,000
See 2/3/32
notes
Andy Bond
Special 11/4/24
Nil
20.52
—
1,600,000 (600,000) (200,000)
800,000 7,682,688
See
On
award
notes vesting
Neil
Buy-out 12/10/23
Nil
30 156,888
—
—
—
156,888
738,598
See 1/4/26
Galloway
notes
Neil
VCP 30/09/23
Nil
22.42 181,600
—
—
—
181,600
861,523
See 30/9/25
Galloway
transfer
notes
Neil
NCOs 22/12/23
Nil
25.42
—
322,714
—
—
322,714 1,886,780
See 30/9/26
Galloway
notes
Notes to the table
1
The VCP award of nil-cost options granted to Andy Bond will be fully offset at vesting against founder shares.
2
The nil-cost options are capable of being granted under the VCP over various years, subject to annual hurdles up to early 2027 (further details are included in the
Remuneration Policy). Vesting is determined following the year end. Where the annual hurdle has been reached, awards may continue to vest until the eighth vesting
date.
3. VCP awards are also subject to a holding period which ends two years from the first vesting date for that award.
4. Andy Bond was granted the “Chair Award” in April 2024 which vests according to performance conditions in FY25 and FY26.
5. Following appointment, in acknowledgement of the forfeited short-term incentives from Neil’s past employment, Neil was granted nil-cost options equivalent to 150% of
his annual base salary. The grant was approved prior to 30 September 2023 and was formally documented on 12 October 2023.
6. The VCP opportunity granted to Neil Galloway is exchanged for RSUs as detailed in this table, alongside participation in the Group LTIP. The grant will vest in two years,
subject to financial performance measures, and has a one-year hold period.
7. Neil Galloway was awarded 322,714 share awards in relation to nil cost options which will vest in FY26 as long as certain performance conditions are met.
Awards granted during the financial year to 30 September 2024
There have been no nil-cost options granted in the financial year under the VCP as the performance threshold was not met. No new
awards have been granted under the Equity Award Plan (EAP) during the financial year.
Andy Bond – one-off share award
In recognition of the role that Andy Bond undertook as the Executive Chair he was granted a one-off share award of 1,600,000 shares.
This award of shares was split into two tranches, with the first half vesting at the end of FY24 and second at the end of FY25, with
both having an EBITDA performance condition.
Date of grant
Number of share options
Vesting date
Performance conditions
11 April 2024
Base award - 600,000
Additional award - 200,000
30 September 2024
FY24 EBITDA (IAS 17)
Base award - 600,000
Additional award - 200,000
30 September 2025
FY25 EBITDA (IAS 17)
Neil Galloway – LTIP awards
Under the LTIP, approved at the AGM in January 2022, Neil was granted an award of shares of 250% of his salary in December 2023 using
a share price of PLN 24.66 to calculate the number of shares. This award has performance conditions over the three years to the vesting
of the award at the end of FY26 of an IAS 17 EBITDA less net debt measure (60%), an EBIT measure (30%) and ESG targets of a 10%
reduction in Scope 1 and 2 emissions and 100% coverage for factory audits.
Date of grant
Number of share options
Vesting date
Performance conditions
22 December 2023
322,714
30 September 2026
As outlined above
80
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Statement of Directors’ shareholding and share interests
Under the share ownership guidelines set out in the Remuneration Policy, the CEO and CFO are encouraged to build and maintain a
shareholding equivalent to at least 300% and 200% of their base salaries respectively. The 300% level also applied to the Executive Chair
whilst in role. Shares are valued using the Company’s closing middle market share price on 29 September 2024 of 20.52 PLN, the PLN/EUR
exchange rate of 0.2308, and the GBP/EUR exchange rate of 1.1694.
The following table shows how each Executive Director complies with the shareholding guidelines and the current holdings by
Non-Executive Directors as at 30 September 2024:
Unexercised and/
or unvested and
Shares
Shares
subject to a
held at
held by
service and
Current
30 September
connected
performance
Shareholding
shareholding
Requirement
2024
persons
requirement
requirement
% of salary
met
Executive Directors
Neil Galloway
25,000
—
661,202
200% of salary
17%
No
Stephan Borchert
427,518
—
—
300% of salary
192%
No
Non-Executive Directors
Andy Bond
3,745,301
—
3,989,162
—
—
—
Brendan Connolly
26,700
—
—
—
—
—
Frederick Arnold
—
—
—
—
—
—
Grazyna Piotrowska-Oliwa
20,651
—
—
—
—
—
María Fernanda Mejía
18,067
—
—
—
—
—
Neil Brown
—
—
—
—
—
—
Paul Soldatos
—
—
—
—
—
—
Sean Mahoney
—
—
—
—
—
—
1
Stephan Borchert was appointed to the Board on 1 July 2024. The shareholdings in the table represent his holdings that he has purchased, where these shares count
towards the Investment Shares within the Share Match Plan.
2
Shares held by Andy Bond include shares held by investment vehicles.
3
The nil-cost options issued to Andy Bond under the VCP in February 2022 when he was CEO will be offset against his founder shares, and underpinned, in line with the
VCP underpin mechanism approved by the AGM in February 2023. The shareholding requirements under the Remuneration Policy apply to Executive Directors. Andy
Bond is not an Executive Director; his information has been included to reflect his Executive Director duties as part of his Executive Chair role until 1 October 2024.
4
Neil Galloway has nil-cost options over 156,888 shares due to vest on 1 April 2026, and 181,600 unvested restricted shares when vested the holding of these shares would
result in a shareholding of 245%.
Directors’ and employees’ remuneration table
The information below is in respect of the financial year ended 30 September 2024 against the prior year comparison.
Total
Total
remuneration
remuneration
2024
2023
€
€
Executive Directors
Andy Bond (Executive Chair and previously NED Chair)
4,823,101
336,994
Neil Galloway (CFO)
1,541,896
1,087,566
Stephan Borchert (CEO)
1,283,786
—
Non-Executive Directors
Brendan Connolly (Committee Chair)
113,284
89,024
Frederick Arnold (Committee Chair, appointed June 2024)
55,058
—
Grazyna Piotrowska-Oliwa (NED)
86,534
71,219
Helen Lee Bouygues (NED, resigned October 2023)
—
—
María Fernanda Mejía (Committee Chair)
104,075
71,219
Neil Brown (NED)
—
—
Paul Soldatos (NED)
—
—
Pierre Bouchut (Committee Chair, resigned March 2024)
46,044
89,024
—
Sean Mahoney (NED, appointed March 2024)
—
81
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Remuneration report continued
Change in Director and employee remuneration
The following table outlines the percentage change from one year to the next for Director and employee remuneration, reported in line
with the regulations.
Executive pay ratio
The Dutch Code requires the executive pay ratio and the trend to be disclosed in the annual Remuneration Report. The basis of the pay
ratio comparison uses the Dutch methodology of average employee remuneration.
The chart below summarises the five-year history of total remuneration for the Executive Directors, being the CEO and CFO, alongside
the average remuneration per FTE (excluding Executive Directors). Also shown is the remuneration ratio of the CEO versus the average
employee remuneration.
Note, whilst the table has been shown in Euros to reflect the reporting currency of the Group, the Executive Directors were paid in GBP. In
FY24, Neil Galloway received a salary of £600,000 per annum, Stephan Borchert received a salary of £900,000 per annum, and Andy
Bond received a salary of £835,000 which have been pro-rated in the table below to reflect the portion of the year in which they were in
the role.
FY20
FY21
FY22
FY23
FY24
€
€
€
€
€
CEO1,4, 6 total remuneration (A)
584,918
801,970
1,103,330
4,079,370
4,823,101
YoY %
(25%)
37%
38%
270%
18%
CFO1,3 total remuneration
697,906
964,442
710,005
1,087,566
1,541,896
YoY %
80%
38%
(26%)
53%
42%
Average employee (FTE) total remuneration costs2 (B)
17,986
20,640
21,309
21,395
22,817
YoY %
(1%)
15%
3%
0%
7%
Ratio (A) versus ratio (B)
33:1
39:1
52:1
191:1
211:1
1
Remuneration of the CEO and CFO reflects the total remuneration by year including base salary, taxable benefits, Company pension contributions, STIPs and LTIPs
(where received). The GBP amounts have been converted to Euros based on FX rates used for consolidating the Group’s results.
2
Average employee remuneration is based on the total employee costs across the Group divided by average number of employees on a “full time equivalent” basis
by year.
3
The previous CFO retired with effect from 1 May 2022 so the 2022 figure reflects the pre-retirement remuneration. The current CFO joined the Group on 1 April 2023.
therefore, the 2023 figure reflects a partial year only.
4
The former CEO (Trevor Masters) was appointed to the role in May 2022; therefore, the 2022 figure reflects an aggregated figure for the retired CEO (Andy Bond) up to
his retirement in March 2022 and the former CEO from his appointment in May 2022.
5
Andy Bond’s remuneration in his role as Executive Chair has been included in the CEO line for FY24. No amounts have been included in the CEO line for Stephan
Borchert in FY24.
6
Remuneration for Trevor Masters includes unexercised share options and excludes severance payments.
Relative importance of spend on pay
The table below shows the Company’s expenditure on employee pay compared to distributions to shareholders between 1 October 2023
and 30 September 2024.
FY24
FY23
€m
€m
Distributions to shareholders
—
—
Total employee pay
863.9
724.5
82
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Implementation of Policy from 1 October 2024 to 30 September 2025
Policy element
Stephan Borchert (CEO)
Neil Galloway (CFO)
Base salary
£900,000
£618,000
Benefits
Pension of 13% of base salary, private
Pension of 13% of base salary, private
medical insurance, life assurance, income
medical insurance, life assurance, income
protection, and car allowance
protection, and car allowance
Annual bonus (payable in cash following
Maximum entitlement of £1,350,000
Maximum entitlement of £927,000
completion of the annual audit)
(150% of salary)
(150% of salary)
LTIP Grant of performance share awards
Annual grant of 300% of salary of
Annual grant of 250% of salary of
with a three-year performance period and
performance share awards
performance share awards
additional two-year holding period
(see below)
Share Match Plan Investment in shares in the
One-time award of matching shares
N/A
Company. In return the Company awards
matching shares
Malus and clawback
Provisions apply
Provisions apply
Shareholding requirement (whilst employed)
300% of salary
200% of salary
LTIP performance conditions
Awards granted to the CEO and CFO in FY25 will be subject to the following performance conditions which will be assessed by the
Remuneration Committee following the end of FY27.
The performance conditions comprise of a 45% EPS growth measure, a 45% ROIC measure, and 10% ESG measures.
The Share Match Plan allows the investment of up to two times salary where the Company then provides an award of matching shares
of up to six times the investment dependent on the achievement of share price growth targets that range between PLN 28 and PLN 48.
Directors’ Remuneration Policy
This Remuneration Policy is available on our website. It was amended following shareholder approval at the June 2024 EGM and has not
changed since then. The changes approved were:
•
to allow a notice period of up to twelve-months' from either party under Executive Directors’ service contracts (previously this was
six-months);
•
to enable Executive Directors to participate in the Share Match Plan;
•
to introduce relocation support for Executive Directors who relocate to perform their role; and
•
to reflect the then current position of the VCP and LTIP.
The Remuneration Policy permits deviation from the Policy in the event that it is required for the long-term interests and stability of the
Company or for its profitability. There has been no deviation from the Remuneration Policy (or the malus and clawback provisions
contained within it) to report for the period 30 September 2024.
The proportion of fixed and variable remuneration
To support the Policy’s objectives to deliver long-term sustainable success of the Company, the remuneration package of our Executive
Directors includes a mix of fixed and variable remuneration. The proportion for FY24 is approximately 29% for fixed pay and 71% for
variable remuneration on a target basis. For Andy Bond the fixed element of pay is 20%, 80% variable, for Stephan Borchert is 30% fixed,
70% variable and for Neil Galloway is 53% fixed, 47% variable.
Brendan Connolly
Remuneration Committee Chair
On behalf of the Board
83
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Deviation from the Dutch Corporate Governance Code and Warsaw Code
As the Company is listed on the WSE and incorporated under the laws of the Netherlands, the Company applies the Code of Best
Practice for WSE Listed Companies (the Warsaw Code) and complies with the Dutch Code by applying principles and best practice
provisions that are applicable or explaining why the Company deviates from them.
As the principles set out in the Warsaw Code are similar to the principles of the Dutch Code, the Company complies with a majority
of the principles and best practice provisions of the Dutch Code.
The Company currently does not apply the following provisions of the Dutch Code:
2.1.5 Policy on diversity and
The Company has a D&I policy which focuses on diversity and inclusion within the Board. The Board
inclusion (D&I policy)
recognises the importance of diversity and inclusion within the organisation as a whole (including
at senior management level) and established goals and baselines as part of our 2030 ESG
strategy. It is currently being considered whether the D&I policy should be amended to broaden
the policy's scope in accordance with the Dutch Code.
2.1.6 Reporting on diversity
Consequently, the Company's reporting with respect to the implementation of the D&I policy is
and inclusion
limited to the level of the Board. It is currently being considered whether the D&I policy should be
amended to broaden the policy's scope. More generally however, the Company's reporting with
respect to diversity and inclusion is not limited to the D&I policy and the Company is working to
improve its reporting capabilities across the Group.
2.1.7 Independence of the
The Company operates a one-tier Board which complies with principle 2.1.7(i).
supervisory board
Following Andy Bond stepping in as Executive Chair in September 2023, Stephan Borchert was
appointed as an Executive member of the Board on 6 June 2024. He was also appointed CEO, to
begin on 1 October 2024, with a three-month transition period, beginning on 1 July 2024. Andy Bond
remained in his role as Executive Chair during the transition period, reverting to the role of Non-
Executive Chair on 1 October 2024
The Board consists of three Non-Executive Directors, four independent Non-Executive Directors,
and three Executive Directors.
With regard to principle 2.1.7(iii), three Non-Executive Directors are appointed to the Board pursuant
to arrangements between the Company’s majority shareholder (which holds more than 10% of the
shares of the Company) and certain of its creditors. This arrangement was entered into before the
Company listed on the WSE.
The conditions of appointment of the shareholder-nominated Non-Executive Directors are set out
in a Relationship Agreement between the Company and certain affiliates of the Company’s
majority shareholder. A summary of the key terms of the Relationship Agreement is available on the
Company’s website.
Given the nature of the Relationship Agreement, the independence of the supervisory board is not
expected to change in the short term.
2.1.9 Independence of the chairman Andy Bond was formerly CEO and Executive Director of the Company. Therefore Andy Bond is
of the supervisory board
non-independent Chair of the Board. From 12 September 2023 he was interim Executive Chair and
resumed his role as non-independent Chair on 1 October 2024.
2.2.2 Appointment and
Members of the Board are appointed for a period of three years and may then be reappointed
reappointment periods –
twice for three-year periods. These appointment arrangements are common in the UK, and
supervisory board members
permitted under the Warsaw Code to which the Company is subject to. For these reasons, the
status of compliance with 2.2.2 is not expected to change.
2.2.4 Succession
The term of appointment for the creditor-appointed Non-Executive Directors is determined by the
Relationship Agreement, and the independent Non-Executive Directors have been appointed for
a term of three years, capable of extension for a further two three-year terms. A retirement
schedule is in place and has been published on the Company's website.
2.5.2 Code of Conduct
The Company does not currently have a Group-wide Code of Conduct. Most of the subject matter
which is traditionally included in a Code of Conduct is included in established policies and
procedures in place across the Group. However, the Company intends to introduce a group-wide
Code of Conduct in the new fiscal year.
2.5.4 Accountability regarding culture The Company does not currently have a Group-wide Code of Conduct. Most of the subject matter
which is traditionally included in a Code of Conduct is included in established policies and
procedures in place across the Group. However, the Company intends to consider the introduction
of a group-wide Code of Conduct in the new fiscal year.
3.3.2 Remuneration of supervisory
In respect of work undertaken by them in relation to, and in preparation for, roles as Board members,
board members
in the period prior to the Company’s listing on the WSE, one-off fees were paid to Brendan Connolly,
María Fernanda Mejía, Grazyna Piotrowska-Oliwa and Pierre Bouchut which were used by these
individuals to subscribe for shares in the Company on admission to the WSE (at the admission offer price).
Shares acquired by these Board members on admission must be held until the later of: (i) 26 May 2024;
or (ii) the first anniversary of the date on which the relevant Board member ceases his or her
directorship of the Company.
5.1.3 Independence of the chairman Andy Bond was formerly CEO and Executive Director of the Company. Therefore, Andy Bond does
of the board of directors not qualify as independent within the meaning of best practice provision 2.1.8.
84
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
The Company currently does not apply the following provisions of the Warsaw Code:
1.5
Disclose amounts expensed by Any such expenses have been reported internally, disclosure and assessment as to the rationality
the group in support of culture, of such expenditures will be considered in the new fiscal year.
sports, charities, media, social
organisations, trade unions, etc.
2.11.5 The supervisory board
Any such expenses have been reported internally, disclosure and assessment as to the rationality
prepares a report to the AGM of such expenditures will be considered in the new fiscal year.
once per year to include an
assessment of the rationality
of expenses referred to in
principle 1.5
3.4
Basis of remuneration for
Risk and compliance are managed by the Group General Counsel and the Head of Internal Audit.
those responsible for risk,
The remuneration of these individuals is primarily dependent on the performance of delegated
compliance and internal audit tasks. However, consistent with all employees of the Company, a proportion of these individuals’
respective annual bonuses is dependent on the Company achieving specific financial targets for
the relevant financial year. The financial targets for the Company’s annual bonus scheme are set
by the Company’s Remuneration Committee.
3.7
Group remuneration for risk,
The remuneration of employees who work in risk and compliance roles and internal audit roles
compliance and internal
across the Group comprises a salary and eligibility to receive an annual bonus. A proportion of
audit roles
the annual bonus is dependent on the Company achieving specific financial targets. The
financial targets for the relevant company’s annual bonus scheme are set by the relevant
company’s remuneration committee and are aligned with the financial targets set by the
Company’s Remuneration Committee.
The risk, compliance and internal audit functions of businesses within the Group report
organisationally to the CFO. Managers within the risk, compliance and internal audit functions of the
Group’s businesses attend the meetings of the local board’s audit committee.
6.3
Company incentive schemes
The Company established an incentive scheme (the Value Creation Plan) for senior management
of the Group in March 2020, which was 12 months prior to the Company’s admission to the WSE.
The Value Creation Plan incentive scheme complies with the majority of the requirements of
principle 6.3 except that the incentive scheme does not include non-financial targets and share
options will be issued to participants at nil cost.
Andy Bond was granted a one-off “Chair Award” in April 2024 which complies with some of the
requirements of principle 6.3 but it is a two-year award, does not include non-financial targets
and the exercise price is nil.
85
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Directors’ report
The Board presents its report, together with the
Ethical conduct
The Board is committed to ensuring that all employees,
audited consolidated financial statements, for
customers and suppliers act in an ethical manner. The Group
the year ended 30 September 2024.
has policies in place relating to anti-bribery and corruption,
anti-money laundering, insider trading, child labour, human rights
Indemnity provisions
and sanctions.
The Company indemnifies all Directors within its Articles
R See further detail on pages 49 to 51.
of Association.
Going concern
In addition, the Company holds: (i) Directors’ and Officers’ liability
insurance, which provides cover for liabilities incurred by Directors
The Board is satisfied that the Group will be able to operate within
in the performance of their duties or powers; and (ii) Public
the levels of its facilities and resources for the foreseeable future
Offering of Securities Insurance, to ring-fence any exposure
and deems it appropriate to adopt the going concern basis in
arising from the Initial Public Offering in May 2021.
preparing the financial statements. This is outlined in more detail
in the Going concern statement on page 59.
No payments were made as a result of the indemnity or by the
insurer during the reporting period.
Additional information
Political donations
Conflicts of interest
No political donations were made and no political expenditure
Group-wide processes are in place to review potential conflicts
was incurred during the year (FY24:£Nil). The Company has an
of interest held by senior management, including the Board.
established policy of not making donations to any political party.
Conflicts are routinely raised at Board meetings and recorded
as appropriate.
Dividends
The Board has recommended a full year dividend of 6.2 cents per
Audit information
share subject to the approval of shareholders at the FY25 AGM.
The Board confirms that: (i) to its knowledge there is no relevant
Significant post-balance sheet events
audit information of which the auditors are unaware; and (ii) the
There are no post-balance sheet events to report for FY24.
Board has taken all reasonable steps to ascertain any relevant
Articles of Association
audit information and ensure that the auditors are aware of
such information.
The Company’s Articles of Association may only be amended
by a resolution of the general meeting.
Information contained in the Strategic report
Rules of Procedure
The Strategic report on pages 4 to 59 contains certain information
The Rules of Procedure provide for an internal division of tasks,
required to be included within this Directors’ report. This relates to
procedures, and decision-making of the Board of the Company. In
employee matters, future developments, risk management, and
performing their duties, the Directors shall comply with these rules.
how the Board considers the views of stakeholders.
On 12 September 2023, Andy Bond was appointed as interim
To the extent that the reports contain forward-looking
Executive Chair with the responsibility for leading the Executive
statements, these are made by the Board in good faith based on
team and the overall management of the Company until a
the information available at the time of the Annual Report.
successor CEO was appointed. This is a deviation from the Rules
of Procedure, in particular the responsibilities of the Chair and
Financial instruments
CEO. This statement is made in accordance with clause 20 of
Details of the Group’s objectives and policies on financial risk
the Rules of Procedure.
management and of the financial instruments currently in use are
On 1 July 2024, Stephan Borchert was appointed as CEO and
set out in note 17 to the consolidated financial statements which
Executive Director and Andy Bond reverted to the role of
form part of the report.
Non-Executive Chair on 1 October 2024 following a three-month
transition period.
Employees
Research and development
Diversity and inclusivity
The Group designs products for sale in stores and has
The Company is fully committed to the elimination of unlawful
arrangements with suppliers for the development of goods.
and unfair discrimination and values the difference that a diverse
Further, the Group has invested in the use of more sustainable
workforce brings to the Company. The Company has policies
products and packaging (see ESG section on pages 34 to 51 for
applicable to all colleagues in furtherance of these commitments
further details).
and will continue to focus on developing these in the next
financial year.
Change of control
Disabled people
The Senior Facilities Agreement provides that if the Company is
delisted or otherwise removed from the WSE, or all or substantially
The Group seeks to ensure that disabled people, whether
all of the assets of the Group are sold in a single transaction or a
applying for a vacancy or already in employment, receive equal
series of transactions, the Company is required to notify the
opportunities in respect of job vacancies that they are able to
finance agent. Following a negotiation period, lenders have a
fulfil. They are not discriminated against on the grounds of their
right to cancel their commitments upon giving 30 days’ notice.
disability and are given full and fair consideration of applications,
continuing training while employed, and equal opportunity for
career development and promotion. Where an existing colleague
suffers a disability, it is our policy to retain them in the workforce
where that is practicable.
86
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Board of Directors’ statement
The Board is responsible for preparing the Annual Report and
the financial statements in accordance with applicable law
and regulations.
The Board of Directors hereby represents, to the best of its
knowledge, that the statutory financial statements of the
Company, and its consolidated subsidiaries for the year ended
30 September 2024 are prepared in accordance with the
applicable accounting standards and that they give a true and
fair view of the assets, liabilities, financial position, and results of
the Company and its consolidated subsidiaries, and that the
report of the Board of Directors for the year ended 30 September
2024 gives a true and fair view of the position of the Company
and its consolidated subsidiaries as at 30 September 2024 and
of the development and the performance of the Company and
its consolidated subsidiaries during the year ended 30 September
2024, including a description of the key risks that the Company is
confronted with.
The Board confirms that:
i. the report provides sufficient insights into any failings in the
effectiveness of the internal risk management and control
systems;
ii. the aforementioned systems provide reasonable assurance
that the financial reporting does not contain any material
inaccuracies;
iii. based on the current state of affairs, it is justified that the
financial reporting is prepared on a going concern basis; and
iv. the report states those material risks and uncertainties that are
relevant to the expectation of the Company’s continuity for the
period of 12 months after the preparation of the report.
Stephan Borchert
Neil Galloway
Chief Executive Officer
Chief Financial Officer
20 December 2024
20 December 2024
87
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Financial
statements
Financial statements
Other information
89 Consolidated income statement
140 Independent auditor's report
90 Consolidated statement of
146 Articles of Association provisions
other comprehensive income
governing the distribution of
profit
91 Consolidated statement of
financial position
147 List of branches
92 Consolidated statement of
148 Statutory list of all subsidiaries
changes in equity
and affiliated companies
93 Consolidated statement of
150 Glossary of terms
cash flows
152 Shareholder information
94 Notes to the consolidated
financial statements
129 Separate income statement
130 Separate statement of
financial position
131 Separate statement of changes
in equity
132 Separate statement of cash
flows
133 Notes to the separate
financial statements
88
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Consolidated income statement
for the year ended 30 September 2024
Year to
Year to 30 September
30 September
2023
2024
(Restated)
Note
€000
€000
Continuing operations
Revenue
3
Cost of sales
(3,460,720 )
(3,356,213 )
Gross profit
Administrative expenses
(2,371,764 )
(1,997,171 )
(724,824 )
Goodwill impairment
11
Other non-financial assets impairment
10,11,12
(54,578 )
(3,130 )
Operating (loss) / profit from continuing operations
5
(445,137 )
Financial income
6
Financial expense
7
(140,785 )
(90,550 )
(Loss) / Profit before taxation from continuing operations for the year
(554,119 )
Taxation
9
(107,520 )
(50,481 )
(Loss) / Profit from continuing operations for the year
(661,639 )
Loss on discontinued operations
25
(48,530 )
(11,733 )
(Loss) / Profit for the year
(710,169 )
Earnings per share
30
Basic earnings per share from continuing operations
(114.9 c)
Basic earnings per share from discontinued operations
(8.4 c)
(2.0 c)
Basic earnings per share
(123.3 c)
Diluted earnings per share from continuing operations
(114.9 c)
Diluted earnings per share from discontinued operations
(8.4 c)
(2.0 c)
Diluted earnings per share
(123.3 c)
The notes on pages 94 to 128 form part of these financial statements.
89
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Consolidated statement of other comprehensive income
for year ended 30 September 2024
Year to
Year to 30 September
30 September
2023
2024
(Restated)
€000
€000
(Loss) / Profit for the year
(710,169 )
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss:
Foreign currency translation differences – foreign operations
Effective portion of changes in fair value of cash flow hedges
(38,060 )
Net change in fair value of cash flow hedges reclassified to profit or loss
(85,240 )
(128,442 )
Deferred tax on items that are or may be reclassified subsequently to profit or loss
(8,238 )
Other comprehensive income / (loss) for the year, net of income tax
(84,669 )
Total comprehensive income for the year
(633,187 )
The notes on pages 94 to 128 form part of these financial statements.
90
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Consolidated statement of financial position
at 30 September 2024
30 September As at 1 October
30 September
2023
2022
2024
(Restated)
(Restated)
Note
€000
€000
€000
Non-current assets
Property, plant and equipment
10
Right-of-use asset
12
Goodwill and other intangible assets
11
Trade and other receivables
14
Derivative financial instruments
17
Deferred tax asset
18
Current assets
Inventories
13
Tax receivable
Trade and other receivables
14
Derivative financial instruments
17
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
15
Current tax liabilities
Lease liabilities
12
Borrowings
16
Derivative financial instruments
17
Provisions
19
Non-current liabilities
Trade and other payables
15
Lease liabilities
12
Borrowings
16
Derivative financial instruments
17
Provisions
19
Total liabilities
Net assets
Equity attributable to equity holders of the parent
Share capital
20
Share premium reserve
20
Cash flow hedge reserve
(4,351 )
(32,391 )
Merger reserve
(751 )
(751 )
(751 )
Translation reserve
(23,407 )
(70,316 )
Share-based payment reserve
Retained earnings
Total shareholders’ equity
The notes on pages 94 to 128 form part of these financial statements.
91
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Consolidated statement of changes in equity
for the year ended 30 September 2024
Cash flow
Share-based
Share
Share
hedge
Translation
Merger
payment
Retained
capital
premium
reserve1
reserve2
reserve3
reserve4
earnings Total equity
€000
€000
€000
€000
€000
€000
€000
€000
Balance at 1 October 2023
(32,391 )
(25,784 )
(751 )
Impact of correction of errors (note 26)
-
-
-
-
-
(21,814 )
(19,437 )
Restated balance at 1 October 2023
(32,391 )
(23,407 )
(751 )
Total comprehensive income for the period
Loss for the year
-
-
-
-
-
-
(710,169 )
(710,169 )
Other comprehensive income for
the period
-
-
-
-
-
Total comprehensive income for the period
-
-
-
-
(710,169 )
(633,187 )
Transactions with owners, recorded
directly in equity
Issue of share capital
-
-
-
-
-
-
-
-
Equity-settled share-based payments
(see note 21)
-
-
-
-
-
-
Total contributions by and distributions
to owners
-
-
-
-
-
-
Balance at 30 September 2024
(4,351 )
(751 )
1
The cash flow hedge reserve represents the cumulative effect of fair value gains and losses on cash flow hedges in the Group.
2
The translation reserve represents the cumulative foreign exchange differences on the translation of the net assets of the Group’s foreign operations from their
functional currency to the presentation currency of the parent.
3
The merger reserve represents the difference between the cost of the Company’s investment in its subsidiaries acquired using the principles of merger accounting
and the aggregate carrying value of assets and liabilities of the subsidiaries acquired.
4
The Group provides equity settled share based payment awards; see note 21.
The notes on pages 94 to 128 form part of these financial statements.
Consolidated statement of changes in equity
for the year ended 30 September 2023
Cash flow
Translation
Share-based
Retained
Share
Share
hedge
reserve2
Merger
payment
Earnings Total equity
capital
premium
reserve1 (Restated)
reserve3
reserve4 (Restated)
(Restated)
€000
€000
€000
€000
€000
€000
€000
€000
Balance at 1 October 2022
(70,316 )
(751 )
Impact of correction of errors (note 26)
-
-
-
-
-
-
(16,201 )
(16,201 )
Restated balance at 1 October 2022
(70,316 )
(751 )
Total comprehensive income for the period
Profit for the year
-
-
-
-
-
-
Other comprehensive income for
the period
-
-
(131,578 )
-
-
-
(84,669 )
Total comprehensive income for the period
-
-
(131,578 )
-
-
Transactions with owners, recorded
directly in equity
Issue of share capital
-
-
-
-
-
-
Equity-settled share-based payments
(see note 21)
-
-
-
-
-
(2,817 )
-
(2,817 )
Total contributions by and distributions
to owners
-
-
-
-
(2,817 )
-
(2,807 )
Balance at 30 September 2023
(32,391 )
(23,407 )
(751 )
1
The cash flow hedge reserve represents the cumulative effect of fair value gains and losses on cash flow hedges in the Group.
2
The translation reserve represents the cumulative foreign exchange differences on the translation of the net assets of the Group’s foreign operations from their
functional currency to the presentation currency of the parent.
3
The merger reserve represents the difference between the cost of the Company’s investment in its subsidiaries acquired using the principles of merger accounting
and the aggregate carrying value of assets and liabilities of the subsidiaries acquired.
4
The Group provides equity settled share based payment awards; see note 21.
The notes on pages 94 to 128 form part of these financial statements.
92
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Consolidated statement of cash flows
for the year ended 30 September 2024
30 September 30 September
2024
2023
Note
€000
€000
Cash flows from operating activities
(Loss)/Profit for the period from continuing operations:
(661,639 )
Adjustments for:
Depreciation, amortisation and impairment
10,11,12
Right-of-use asset depreciation
12
Financial income
6
(31,803 )
(10,245 )
Financial expense
7
Profit on sale of property, plant and equipment
(270 )
(477 )
Equity-settled share-based payment expenses
21
(2,817 )
Taxation
9
Decrease/(Increase) in trade and other receivables
(57,660 )
Increase in inventories
(49,514 )
(175,075 )
Increase in trade and other payables
Decrease in provisions and employee benefits
(3,993 )
(17,208 )
Settlement of derivatives
(38,099 )
Cash generated by operations
Tax paid
(85,449 )
(75,424 )
Net cash from operating activities in discontinued operations
(1,909 )
(3,946 )
Net cash inflow from operating activities
Cash flows used in investing activities
Proceeds from sale of property, plant and equipment
Interest received
Disposal of a subsidiary net of cash disposed
(8,465 )
Additions to property, plant and equipment
10
(204,559 )
(356,664 )
Additions to other intangible assets
11
(7,189 )
(25,815 )
Net cash from investing activities in discontinued operations
(78 )
(7,159 )
Net cash outflow used in investing activities
(195,041 )
(385,296 )
Cash flows from financing activities
Proceeds from the issue of share capital
Proceeds from borrowings net of fees incurred
Repayment of borrowings
(120,000 )
(315,000 )
Interest paid
(56,184 )
(18,809 )
Payment of interest on lease liabilities
12
(77,311 )
(60,188 )
Repayment of lease liabilities
12
(364,274 )
(319,992 )
(2,970 )
Net cash from financing activities in discontinued operations
(6,781 )
Net cash outflow from financing activities
(620,739 )
(289,545 )
Net increase/(decrease) in cash and cash equivalents
(22,146 )
Cash and cash equivalents at beginning of period
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at end of period
The notes on pages 94 to 128 form part of these financial statements.
93
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
1. Significant accounting policies
Pepco Group operates a European multi-format discount retail chain, specialising in apparel, homeware, and fast-moving consumer goods, serving value-conscious customers.
The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the Group). The parent company financial statements present information about the Company as a separate entity and not about its Group.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all years presented in these Group financial statements.
1.1 Measurement convention
The financial statements have been prepared on the historical cost basis except for derivatives which are measured at fair value. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
1.2 Going concern
In determining the appropriate basis of preparation of the 2024 consolidated financial statements, the Board of Directors are required to consider whether the Group and the Company can continue in operational existence for the foreseeable future.
At the time of signing the consolidated financial statements, the Directors have a reasonable expectation that the Group has sufficient resources to continue in operation for the foreseeable future, which is not less than 12 months from signing these financial statements. The Group undergoes a rigorous and comprehensive annual budgeting and long-term planning process which is reviewed and challenged by various stakeholders across management and the Board. This financial plan, which is ultimately approved by the Board, is then utilised to measure business performance and it also forms the ‘base case’ upon which the going concern analysis has been based.
In assessing going concern, the Group has considered a 2-year period to the end of FY26, beyond the minimum requirement of 12 months form the date of signing the financial statements. The Directors have considered a severe but plausible downside sensitivity and a reverse stress test. The analysis suggested that despite the harsh scenario assumptions, which the management judge to be very unlikely, the Group still retains sufficient headroom across the assessment period and is able to meet all the requirements of its lending covenants.
Further information regarding the Group’s business activities, together with the factors likely to affect its future development, performance and position is set out in the Executive Chair's and CFO’s reports. Since the going concern assessment uses a base case which has been built on the financial plan, careful consideration has been given to the current macroeconomic environment and the future implications and impacts it may have.
Given the above, the Directors have deemed the application of the going concern basis for the preparation of these consolidation financial statements to be appropriate.
1.3 Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration potential voting rights. The acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
Acquisitions from entities under common control
In accounting for Group reorganisation as a business combination under common control, the following principles have been adopted:
Where investments are acquired in exchange for consideration and the transactions have economic substance the Group has chosen to account for these transactions at fair value by applying acquisition accounting in accordance with the principles of IFRS 3 as discussed in the accounting policy for business combinations.
Where businesses are acquired in exchange for the issue of shares, the Group has chosen to account for these transactions using the transferor’s book values (pooling of interest method) with the difference between the value of the net assets acquired and nominal value of the shares issued being recognised within a merger reserve in equity.
Notes to the consolidated financial statements
•
•
94
Pepco Group
N.V.
Annual Report and Consolidated Financial Statements 2024
1. Significant accounting policies continued
1.3 Basis of consolidation continued
Change in subsidiary ownership and loss of control
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
Where the Group loses control of a subsidiary, the assets and liabilities are derecognised along with any related non-controlling interest and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
Group reorganisation
The Group undertook a Group reorganisation exercise during 2021. As part of this process, Pepco Group N.V. (formerly Pepco Group B.V.) was inserted above Pepco Group Limited in the Group’s structure.
On 13 May 2021, Pepco Group N.V. (the Company) acquired the entire shareholding of Pepco Group Limited and its related subsidiaries, by a way of a share for share exchange with Flow Newco Limited, becoming the Group’s immediate parent company. The insertion of the Company on top of the existing Pepco Group Limited does not constitute a business combination under IFRS 3 “Business Combinations” and instead has been accounted for as a Group reorganisation. Merger accounting has been used to account for this transaction.
1.4 Foreign currency
Transactions in foreign currencies are translated to the Group’s presentation currency at the monthly average foreign exchange rate. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are retranslated to the functional currency at foreign exchange rates ruling at the dates the fair value was determined. Foreign exchange differences arising on translation are recognised in the income statement except for differences arising on the retranslation of qualifying cash flow hedges, which are recognised in other comprehensive income.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to the Group’s presentation currency, the Euro, at foreign exchange rates ruling at the statement of financial position date. The revenues and expenses of foreign operations are translated at the average rate during the month in which they were incurred. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in the translation reserve.
1.5 Classification of financial instruments issued by the Group
Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions:
a) they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and
b) where the instrument will or may be settled in the Group’s own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Group’s own equity instruments or is a derivative that will be settled by the Group exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the Group’s own shares, the amounts presented in this consolidated historical financial information for share capital exclude amounts in relation to those shares.
1.6 Non-derivative financial instruments
Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.
Financial assets – classification, subsequent measurement and gains and losses
On initial recognition, a financial asset is classified as measured at: amortised cost; fair value through other comprehensive income (FVOCI) – debt investment; FVOCI – equity investment; or fair value through profit or loss (FVTPL).
The Group makes an assessment of the objective of the business model in which a financial asset is held because this best reflects the way the business is managed and information is provided to management.
Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:
•
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
•
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
The Group does not have any financial assets accounted for at FVOCI. All financial assets not classified as measured at amortised cost
or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets which are accounted for in accordance
with the accounting policy (note 1.7) for derivative financial instruments and hedge accounting
. All financial assets are recognised at the
trade date.
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
1. Significant accounting policies continued
1.6 Non-derivative financial instruments continued
Financial liabilities – classification, subsequent measurement and gains and losses
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held for trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in the income statement.
See the accounting policy 1.7 regarding derivative financial instruments and hedge accounting for further information.
Derecognition
Financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which either substantially all of the risks and rewards of ownership of the financial asset are transferred, or the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. On derecognition of a financial asset, the difference between the carrying amount derecognised and the consideration received is recognised in the income statement.
Financial liabilities
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value. On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in the income statement.
1.7 Derivative financial instruments and hedging
Derivative financial instruments (comprising foreign currency forward contracts and commodity hedges) are used to manage risks arising from changes in foreign currency exchange rates (primarily relating to the purchase of overseas sourced products) and fuel price fluctuations. The Group does not hold or issue derivative financial instruments for speculative trading purposes. The Group uses the derivatives to hedge highly probable forecast transactions and, therefore, the instruments are mostly designated as cash flow hedges.
Derivatives are recognised at fair value on the date a contract is entered into and are subsequently remeasured at their fair value. The effective element of any gain or loss from remeasuring the derivative instrument is recognised directly in the cash flow hedge reserve.
The associated cumulative gain or loss is reclassified from the cash flow hedge reserve in equity and recognised in the income statement in the same period or periods during which the hedged transaction affects the income statement. Any element of the remeasurement of the derivative instrument which does not meet the criteria for an effective hedge is recognised immediately in the income statement within financial income or financial expenses.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in other comprehensive income at that time remains in other comprehensive income and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss which was reported in other comprehensive income is recognised immediately in the income statement.
The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months or as a current asset or liability if the remaining maturity of the hedged item is less than 12 months from the reporting date.
1.8 Property, plant and equipment
Property, plant and equipment are stated at purchase cost (together with incidental costs of acquisition) less accumulated depreciation and accumulated impairment losses.
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows:
| Leasehold property improvements | – | Over the term of the lease |
| Fixtures and equipment | – | 3 to 25 years (dependent upon lease term) |
| Buildings | – | 10 to 40 years |
| Land | – | No depreciation is charged |
Depreciation methods, useful lives and residual values are reviewed at each reporting date.
Notes to the consolidated financial statements continued
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
1. Significant accounting policies continued
1.9 Business combinations
When the consideration transferred by the Group in a business combination includes an asset or liability resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the “measurement period” (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.
Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the fair value of the identifiable net assets acquired. Goodwill is initially measured at cost, being the excess of the acquisition cost over the Group’s interest in the assets and liabilities recognised. Goodwill is not amortised, but is tested for impairment annually or whenever there is an indication of impairment. For the purposes of impairment testing, goodwill acquired is allocated to the cash-generating unit (CGU) that is expected to benefit from the synergies of the combination. The carrying value of the CGU containing the goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed.
Brand
Brand is stated at cost less any accumulated amortisation and accumulated impairment losses. Brand is amortised over 40 years on a straight-line basis from 1 October 2018.
Other intangible assets
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and accumulated impairment losses.
Software
Capitalised software costs include both external direct costs of goods and services, and internal payroll-related costs for employees who are directly associated with the software project.
Development costs are recognised as intangible assets when the following criteria are met:
•
It is technically feasible to complete the software so that it is available for use.
•
Management intends to complete the software for use in the business.
•
It can be demonstrated how the software will generate probable economic benefits in the future.
•
Adequate technical, financial and other resources are available to complete the project.
Capitalised software development costs are amortised on a straight-line basis over their expected economic lives.
Computer software under development is held at cost less any recognised impairment loss. Any impairment in value is recognised within the income statement.
Amortisation
Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each reporting date.
Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:
| Trademarks | – | 5 years |
| Software | – | 3–7 years |
1.11 Inventories
Inventories are stated at the lower of cost and net realisable value after making due allowance for obsolete and slow-moving inventory. Cost is calculated on a weighted average basis. The Group estimates a slow-moving inventory provision based on prior stock performance and current market conditions. The Group also provides for obsolete inventory. Inventory cost includes all direct costs and an appropriate proportion of fixed and variable overheads.
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
1. Significant accounting policies continued
1.12 Impairment excluding inventories and deferred tax assets
Financial assets (including receivables)
The Group is not exposed to large amounts of credit risk due to the nature of its operations as a direct to customer retailer; however, the Group recognises an allowance for expected credit losses for all financial assets measured at amortised costs. These losses are calculated with reference to the difference between contractual cash flows and cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate.
Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit (CGU)). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to CGUs. Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.
An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior years are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
1.13 Cash and cash equivalents
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less.
1.14 Employee benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which the Group pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement in the periods during which services are rendered by employees.
Share-based payment transactions
The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity for equity-settled schemes or liabilities for cash-settled schemes, over the period in which the employees become unconditionally entitled to the awards. The fair value of the awards granted is measured using an option valuation model where appropriate, taking into account the terms and conditions upon which the awards were granted. The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related service and non-market performance vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting and/or market performance conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
1.15 Provisions
A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as a result of a past event that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability and current market assessment of the time value of money.
1.16 Revenue
Revenue comprises the consideration paid for products by external customers at the point of sale in stores, net of value added tax and promotional discounts. Revenue is recognised on the sale of goods when the product is sold to the customer.
It is the Group’s policy to sell its products to customers with a right of return. The Group uses the expected value method to estimate the value of goods that will be returned, because this method best predicts the amounts of variable consideration to which the Group will be entitled. However, the level of returns is not considered material; therefore, no right of return asset or refund liability is recognised. On the basis of materiality revenue is therefore recognised at the full value of the consideration received. This is assessed on an ongoing basis.
Notes to the consolidated financial statements continued
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
1. Significant accounting policies continued
1.17 Cost of sales
Cost of sales consist of costs related to purchase price of consumer products sold to customers and inbound shipping charges to distribution centres. Shipping charges to receive products from suppliers are included in inventory and recognised as cost of sales upon sale of products to customers. In addition, warehouse reception and storage costs are not incorporated into inventory valuation on the balance sheet but directly expensed through the income statement as distribution costs. Supplier discounts and contributions to common marketing or advertising campaigns are measured based on contracts signed with suppliers and are considered as a reduction of the prices paid for the products and, therefore, recorded as a reduction of the inventory cost.
1.18 Distribution costs (included within operating expenses)
Distribution costs consist of costs incurred in operating and staffing distribution centres and stores and transporting inventory from distribution centres to stores. They consist of warehousing and store employee salaries and wages, store expenses, advertising costs and other selling expenses.
1.19 Administrative expenses (included within operating expenses)
Administrative expenses consist of support office employees’ salaries and wages, impairment losses and reversals, gains and losses on the sale of non-current assets and disposal groups held for sale, restructuring costs and other general and administrative expenses.
1.20 Lease accounting
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low-value assets (such as personal computers, small items of office furniture and telephones). For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
Lease liability – initial recognition
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date. The lease payments are discounted at the Group’s incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
•
fixed lease payments (including in-substance fixed payments), less any lease incentives;
•
variable lease payments that depend on an index or rate (such as RPI), initially measured using the index or rate at the commencement date;
•
the amount expected to be payable by the lessee under residual value guarantees;
•
the exercise price of purchase options where the Group is reasonably certain to exercise the options; and
•
payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs. As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. The Group has not used this practical expedient.
The lease liability is presented as a separate line in the Consolidated statement of financial position, split between current and non-current liabilities.
Lease liability – subsequent measurement
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
Lease liability – remeasurement
The lease liability is remeasured where:
•
there is a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate; or
•
the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which case the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments’ change is due to a change in a floating interest rate, in which case a revised discount rate is used); or
•
the lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.
When the lease liability is remeasured, an equivalent adjustment is made to the right-of-use asset unless its carrying amount is reduced to zero, in which case any remaining amount is recognised in profit or loss.
Right-of-use asset – initial recognition
The right-of-use asset comprises the initial measurement of the corresponding lease liability, lease payments made at or before the commencement date and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Where the Group has an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. The costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories.
The right-of-use asset is presented as a separate line in the balance sheet.
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
1. Significant accounting policies
continued
1.20 Lease accounting continued
Right-of-use asset – subsequent measurement
Right-of-use assets are amortised over the shorter of the
lease term and useful life of the underlying asset.
Impairment
The Group applies IAS 36 to determine whether a right-of-use
asset is impaired and accounts for any identified impairment
loss as described in the “Impairment – non-financial assets” policy.
1.21 Taxation
Tax on the profit or loss for the year comprises current and
deferred tax recognised and measured in accordance with IAS 12.
Tax is recognised in the income statement except to the extent that it
relates to items recognised directly in equity or other
comprehensive income, in which case it is recognised directly in equity or
other comprehensive income.
Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax
payable in respect of previous years.
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial
recognition of goodwill; the initial recognition of assets or liabilities that affect
neither accounting nor taxable profit other than in a business
combination; and differences relating to investments in subsidiaries to the
extent that they will probably not reverse in the foreseeable
future. The amount of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at the reporting
date.
A deferred tax asset is recognised only to the extent that it
is probable that future taxable profits will be available
against which the temporary difference can be utilised.
The Group has adopted International Tax Reform – Pillar Two
Model Rules (Amendments to IAS 12) upon their release on 23 May
2023. The amendments provide a temporary mandatory exception from
deferred tax accounting for the top-up tax, which is effective
immediately, and require new disclosures about the Pillar Two exposure for
accounting periods beginning on or after 1 January 2023.
IAS 12.15 and 24 require that deferred tax liabilities and
assets be recognised for all taxable and deductible temporary
differences (subject to recoverability requirements for deferred tax
assets) unless the deferred tax liability or asset arises from
the initial recognition of an asset or liability in a transaction that: (i) is not a
business combination; (ii) at the time of the transaction,
affects neither accounting profit nor taxable profit (tax loss); and (iii) at the time of
the transaction, does not give rise to equal taxable and
deductible temporary differences.
1.22 Operating segments
Operating segments are reported in a manner consistent with the
internal reporting provided to the Chief Operating Decision Maker.
The Chief Operating Decision Maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Board that makes strategic decisions.
1.23 Government grants
Grants are recognised only when there is reasonable assurance
that the Group will comply with the conditions attached to them
and that the grants will be received.
1.24 Events after the balance sheet date
The consolidated financial statements are adjusted to reflect
events that occurred provided they give evidence of conditions that
existed at the balance sheet date.
Events that are indicative of conditions that arose after the
balance sheet date are disclosed where significant, but do not
result in an adjustment of the consolidated financial statements themselves.
1.25 Supplier income
Rebate income
Rebate income consists of income generated from volume-related
rebate agreements and other supplier funding received on an ad hoc
basis for in-store promotional activity. The income received is
recognised as a credit against cost of sales.
Volume-related income is recognised based on the expected
entitlement at the reporting date based on agreed and documented
contractual terms. Where the contractual period is not yet
complete, the Group will estimate expected purchase volumes taking
into account current performance levels to assess the probability of
achieving contractual target volumes.
Other supplier funding is recognised as invoiced to the
suppliers, subject to satisfaction of any related performance
conditions. To minimise the risk arising from estimate, supplier confirmations
are obtained at the reporting date prior to amounts being
invoiced.
Promotional funding
Promotional pricing income relates to income received from
suppliers to invest in the customer offer. It is recognised as a
credit against cost of sales. Timing of invoicing of amounts due is agreed on an
individual basis with each supplier.
Uncollected supplier income at the reporting date is presented
within the financial statements as follows:
Where there is no practice of netting commercial income from
amounts owed to the supplier, the Group will present amounts due
within trade receivables.
Where commercial income is earned but not invoiced to the
supplier at the reporting date, the amount due is included within
prepayments and accrued income.
Notes to the consolidated financial statements continued
•
•
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
1. Significant accounting policies
continued
1.26 Financial income and expenses
Financial expenses comprise interest payable and the
ineffective portion of change in the fair value of cash
flow hedges that are recognised in the income statement. Financial income
comprises interest receivable on funds invested and the
ineffective portion of changes in the fair value of cash flow hedges.
Interest income and interest expense are recognised in
the income statement as they accrue, using the effective
interest method.
1.27 Reserves
Share capital
Called-up share capital represents the nominal value of shares
that have been issued. Share premium represents the difference
between the issue price and the nominal value of the shares issued.
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new ordinary shares are
shown in equity as a deduction, net of tax from the proceeds.
Cash flow reserve
The cash flow hedge reserve represents the effective portion
of cash flow hedges where the contract has not yet expired.
The reserve is stated net of the associated tax. The effective portion is
recycled to the income statement upon expiry of the contract
or when the hedged future cashflows affect profit or loss.
Translation reserve
The translation reserve represents the cumulative translation
differences for foreign operations. This is a legal reserve.
Merger reserve
The merger reserve arose on consolidation as a result of the
acquisition of the Pepco Group companies and Pepkor Import BV on 4
May 2016 and also the acquisition of Fully Sun China Limited and its
subsidiaries on 18 January 2018 and the share for share exchange
transaction that took place on 13 May 2021. It represents the difference
between the cost of the Company’s investment in its subsidiaries
acquired using the principles of merger accounting and the aggregate
carrying value of assets and liabilities of the subsidiaries
acquired.
1.28 New standards and amendments
Standards adopted by the Group for the first time
A number of new and revised standards, including the following,
are effective for annual periods beginning on or after 1 January
2023:
•
IFRS 17 Insurance Contracts, including amendments Initial
Application of IFRS 17 and IFRS 9 – Comparative Information
(effective 1 January 2023)
•
Amendments to IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors – Definition of Accounting Estimates
(effective 1 January 2023)
•
Amendments to IAS 1 Presentation of Financial Statements and IFRS
Practice Statement 2 Making Materiality Judgements – Disclosure Initiative: Accounting Policies (effective 1 January
2023)
•
Amendments to IAS 12 Income Taxes – Deferred Tax Related to
Assets and Liabilities Arising from a Single Transaction
(effective 1 January 2023)
Adoption of these standards has not had an impact on the Group’s
financial statements.
Standards and interpretations to existing standards which are not
yet effective and are under review as to their impact on the Group. The following standards and interpretations to existing standards
have been published that are mandatory for the Group’s accounting
periods beginning on or after 1 October 2024 or later periods but
which the Group has not early adopted:
•
Amendments to IFRS 16 Leases – Lease Liability in a Sale and
Leaseback (effective 1 January 2024)
•
Amendments to IAS 1 Presentation of Financial Statements –
Non-current Liabilities with Covenants, Classification of
liabilities as current or non-current (effective 1 January 2024)
•
Amendments to IAS 7 and IFRS 7 regarding supplier finance
arrangements (effective 1 January 2024)
•
Amendments to IAS 21 to clarify the accounting when there is a
lack of exchangeability (effective 1 January 2025)
•
IFRS 18 Presentation and Disclosures in Financial Statements
(effective 1 January 2027)
•
IFRS 19 Subsidiaries without Public Accountability: Disclosures
(effective 1 January 2027)
No other new standards, new interpretations or amendments to
standards or interpretations have been published which are
expected to
have a significant impact on the Group’s financial statements. In
relation to the published standards and interpretations above, the
Group
is continuing to assess the impact on the financial statements
for future periods and expects there to be no significant material
impact
other than IFRS 18 which the Group is currently performing an
assessment.
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
1. Significant accounting policies continued
1.29 Accounting estimates and judgements
The preparation of these financial statements requires the exercise of judgement, estimates and assumptions that affect the application of policies and reported amount of assets and liabilities, income and expenses. Estimates and judgements are continually evaluated and are based on historical experience and various other factors, including expectations of the future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future period impacted.
The Group makes estimates and assumptions concerning the future. By definition, the resulting accounting estimates will seldom equal the related actual results. The Directors continually evaluate the estimates, assumptions and judgements based on available information and experience.
Key sources of estimation uncertainty
Impairment of intangible assets (goodwill and other intangible assets) and right-of-use assets
The Group assesses whether there are any indicators of impairment as at the reporting date for all intangible assets and right-of-use
assets. Goodwill is tested for impairment annually and at other times when such indicators exist. Other intangible assets are tested for
impairment when there are indicators that the carrying amounts may not be recoverable.
When value in use calculations are undertaken, the Directors must estimate the expected future cash flows from the cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. The key sources of estimation uncertainty are the future business performance over the forecast period (five years), projected long-term growth rates and the discount rates applied. When fair value less costs to sell calculations are used, level 2 and 3 fair value inputs are used. See note 11 for detailed disclosures.
Life of brand asset
The useful life is considered to be 40 years which represents management’s best estimate of the period over which the brand will be utilised based on the trading history of the business, future financial projections and ongoing investment in the business, along with the retail segment occupied by Poundland and the active proposition development happening within the business. The brand is amortised on a straight-line basis. See note 11 for detailed disclosures.
Key judgements
The judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are
discussed below.
Lease discount rate
Where a rate implicit to the lease is not available, the selection of a discount rate for a lease is based upon the marginal cost of borrowing to the business in relation to the funding for a similar asset.
Management calculates appropriate discount rates based upon the marginal cost of borrowing currently available to the business as adjusted for several factors including the term of the lease, the location and type of asset and how often payments are made.
Management considers that these are the key details in determining the appropriate marginal cost of borrowing for each of these assets. See note 1.20 for detailed disclosures.
Leases
Management exercises judgement in determining the lease term on its lease contracts. Within its lease contracts, particularly those in respect of its retail business, break options are included to provide operational and financial security should store performance be different to expectations. At inception of a lease, management will typically assess the lease term as being the full lease term as such it is reasonably certain that break options will not be exercised.
As stated in the accounting policies, the discount rate used to calculate the lease liability is based on the incremental borrowing rate. Incremental borrowing rates are determined quarterly and depend on the lease term, currency and start date of the lease. The incremental borrowing rate is determined based on a series of inputs including the risk-free rate based on government bond rates, country specific risk and entity specific risk. See note 12 for detailed disclosures.
1.30 Non-underlying items
Management exercises judgement in determining the adjustments to apply to IFRS Accounting Standards measurements. Management believes these measures provide additional useful information to illustrate the underlying trends, performance and position of the Group. Non-underlying adjustments constitute material, exceptional, unusual and other items. In determining whether events or transactions are treated as non-underlying items, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence. Examples of charges or credits meeting the above definition and which have been presented as non- underlying items in the current and/or prior years include:
•
•
•
•
•
Business restructuring programmes;
Hungary fraud incident; and
Impairment of Goodwill and Brand asset.
IFRS 2 charges in respect of management Value Creation Plan;
Notes to the consolidated financial statements continued
In the event that other items meet the criteria, which are applied consistently from year to year, they are also treated as non-underlying
items. Further information about the determination of non-underlying and other items in financial year 2024 is included in note 4. The
non-underlying items are not defined by IFRS
Accounting Standards.
102
Cost relating to implementation of Software-as-a-Service IT solutions and expensing significant ERP programme costs incurred;
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
1. Significant accounting policies continued
1.31 Alternative performance measures (APMs)
Management exercises judgement in determining the adjustments to apply to IFRS Accounting Standards measurements in order to derive suitable APMs. As set out in note 27, APMs are used as management believes these measures provide additional useful information on the underlying trends, performance and position of the Group. These measures are used for performance analysis. The APMs are not defined by IFRS Accounting Standards and therefore may not be directly comparable with other companies’ APMs. These measures are not intended to be a substitute for, or superior to, IFRS Accounting Standards measurements.
2. Segmental analysis
Operating segments are defined as components of the Group about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (CODM), or decision-making group, in deciding how to allocate resources and in assessing performance. Operating segments are reported in a manner consistent with the internal reporting provided to the Board of Directors, which is considered the group’s chief operating decision maker.
The Group has identified three significant revenue-generating operating segments. One being business trading under the Pepco banner, one being business trading under the Poundland banner, and the final being business trading under the Dealz banner. In previous reporting periods, the Group referred to two significant revenue-generating operating segments therefore this represents a change and a restatement has been made to ensure results are provided on a comparative basis. A final “other” operating segment includes the Group’s sourcing operations, Group functions and other activities that do not meet the threshold requirements for individual reporting.
EBITDA is the primary profit metric reviewed by the CODM and has been presented by operating segment with a reconciliation to operating profit. EBITDA is defined as operating profit before depreciation, amortisation, impairment, profit/loss on disposal of tangible and intangible assets. Tax and interest are not reviewed by the CODM on an operating segment basis. Segment assets and liabilities are measured in the same way as in the consolidated historical financial information. These assets and liabilities are allocated based on the operations of the segment and the physical location of the asset. Investments in subsidiaries within the Group, along with relevant consolidation adjustments and eliminations are allocated to the relevant segment. Assets and liabilities included within the “other” segment relate to balances held by the Group’s sourcing operations.
| Year to | ||
| Year to | 30 September | |
| 30 September | 2023 | |
| 2024 | (Restated) | |
| €000 | €000 | |
| External revenue | ||
| Pepco | 3,853,169 | 3,374,980 |
| Poundland UK & ROI | 2,006,333 | 2,000,633 |
| Dealz Poland | 307,247 | 220,051 |
| Group external revenue | 6,166,749 | 5,595,664 |
| Underlying EBITDA | ||
| Pepco | 785,292 | 554,768 |
| Poundland UK & ROI | 153,319 | 195,325 |
| Dealz Poland | 24,166 | 6,535 |
| Other | (18,750) | (3,089) |
| Group underlying EBITDA | 944,027 | 753,539 |
| Reported EBITDA | ||
| Pepco | 743,029 | 523,355 |
| Poundland UK & ROI | 147,169 | 174,231 |
| Dealz Poland | 22,348 | 2,453 |
| Other | (20,766) | 1,899 |
| Group EBITDA | 891,780 | 701,938 |
| Less reconciling items to operatingprofit | ||
| Depreciation of right-of-use asset | (364,757) | (302,940) |
| Impairment of right-of-use asset | (6,104) | — |
| Depreciation of property, plant and equipment | (182,382) | (147,390) |
| Impairment of property, plant and equipment | (9,767) | (3,130) |
| Impairment of goodwill | (724,824) | — |
| Amortisation of other intangibles | (10,646) | (9,572) |
| Impairment of other intangibles | (38,707) | — |
| Profit on disposal of property, plant and equipment | 270 | 477 |
| Other expenses | — | (233) |
| Group operating (loss) / profit from continuing operations | (445,137) | 239,150 |
All income statement disclosures are for the continuing business only. The total asset, total liability and capital expenditure disclosures are for the entire Group.
103
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
2. Segmental analysis continued
| Year to | ||
| Year to | 30 September | |
| 30 September | 2023 | |
| 2024 | (Restated) | |
| €000 | €000 | |
| Depreciation and amortisation | ||
| Pepco | 367,587 | 283,845 |
| Poundland UK & ROI | 156,295 | 152,480 |
| Dealz Poland | 32,352 | 22,102 |
| Other | 1,551 | 1,475 |
| Group depreciation and amortisation | 557,785 | 459,902 |
| Impairment of property, plant and equipment, goodwill, intangible and right of use assets | ||
| Pepco | 4,362 | 3,130 |
| Poundland UK & ROI | 12,128 | — |
| Dealz Poland | — | — |
| Other | 762,912 | — |
| Group Impairment of property, plant and equipment, goodwill, intangible and right of use assets | 779,402 | 3,130 |
| Total assets | ||
| Pepco | 2,802,349 | 2,591,652 |
| Poundland UK & ROI | 999,492 | 1,774,542 |
| Dealz Poland | 172,474 | 154,102 |
| Other | 23,425 | 55,060 |
| Group total assets | 3,997,740 | 4,575,356 |
| Total liabilities | ||
| Pepco | 2,047,329 | 1,793,047 |
| Poundland UK & ROI | 679,969 | 786,055 |
| Dealz Poland | 94,321 | 97,108 |
| Other | 664,705 | 761,438 |
| Group total liabilities | 3,486,324 | 3,437,648 |
| Additions to non-current assets | ||
| Pepco | 439,790 | 561,587 |
| Poundland UK & ROI | 143,942 | 196,524 |
| Dealz Poland | 29,273 | 70,577 |
| Other | 1,946 | 946 |
| Group additions to non-current assets | 614,951 | 829,634 |
3. Revenue and Geographical segments
Revenue comprises the consideration paid for products by external customers at the point of sale in stores, net of value added tax and promotional sales discounts. The Group’s disaggregated revenue recognised relates to the following geographical segments:
| Year to | ||
| Year to | 30 September | |
| 30 September | 2023 | |
| 2024 | (Restated) | |
| €000 | €000 | |
| UK and Republic of Ireland | 2,006,333 | 2,000,633 |
| Poland | 1,617,790 | 1,413,973 |
| Rest of Central and Eastern Europe | 1,950,271 | 1,816,043 |
| Rest of Western Europe | 592,355 | 365,015 |
| 6,166,749 | 5,595,664 |
Notes to the consolidated financial statements continued
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
The Group’s disaggregated non-current assets recognised relates to the following geographical segments:
| Year to | ||
| Year to | 30 September | |
| 30 September | 2023 | |
| 2024 | (Restated) | |
| €000 | €000 | |
| UK and Republic of Ireland | 601,910 | 1,376,697 |
| Poland | 597,935 | 524,444 |
| Rest of Central and Eastern Europe | 582,408 | 574,497 |
| Rest of Western Europe | 480,826 | 463,651 |
| 2,263,079 | 2,939,289 |
4. Non-underlying items
The Group believes underlying profit, an alternative profit measure, is a valuable way in which to present business performance as it provides the users of the accounts with a clear and more representative view of ongoing business performance. Non-underlying items, which are removed from the reported IFRS Accounting Standards measures, are defined as material, exceptional, unusual and other items.
Underlying performance measures should be considered in addition to IFRS Accounting Standards measures and are not intended to be a substitute for them. The Group also uses underlying financial performance to improve the comparability of information between reporting periods and geographical units and to aid users in understanding the Group’s performance. Consequently, the Group uses underlying financial performance for performance analysis, planning, reporting and incentive setting.
| Year to | ||
| Year to | 30 September | |
| 30 September | 2023 | |
| 2024 | (Restated) | |
| €000 | €000 | |
| Reported EBITDA from continuing operations | 891,780 | 701,938 |
| Group Value Creation Plan (VCP) | 893 | (1,905) |
| Impact of implementation of IFRIC interpretation on SaaS arrangements | 29,661 | 42,351 |
| Restructuring costs | 5,450 | 11,155 |
| Hungary Fraud Incident | 16,243 | — |
| Underlying EBITDA from continuing operations | 944,027 | 753,539 |
| Reported operating (loss) / profit from continuing operations | (445,137) | 239,150 |
| Group Value Creation Plan (VCP) | 893 | (1,905) |
| Impact of implementation of IFRIC interpretation on SaaS arrangements | 29,159 | 43,493 |
| Restructuring costs | 3,689 | 14,285 |
| Hungary Fraud Incident | 16,243 | — |
| Impairment of Goodwill and Brand | 775,051 | — |
| Underlying operating profit from continuing operations | 379,898 | 295,023 |
| Reported (loss) / profit before taxation from continuing operations for the year | (554,119) | 158,845 |
| Group Value Creation Plan (VCP) | 893 | (1,905) |
| Impact of implementation of IFRIC interpretation on SaaS arrangements | 29,159 | 43,493 |
| Restructuring costs | 3,689 | 13,473 |
| Hungary Fraud Incident | 16,243 | — |
| Impairment of Goodwill and Brand | 775,051 | — |
| Underlying profit before tax from continuing operations | 270,916 | 213,906 |
IFRS 2 charge: A Value Creation Plan (“VCP”) was approved by the Board of Directors in March 2020 as a reward tool to incentivise the top management of the Pepco Group and to retain them post an IPO. The Group treat the VCP associated costs as Non-Underlying Costs on the basis;
•
the VCP was specific IPO related incentive which is not a typical share based payment scheme; and
•
the scheme was implemented prior to the IPO and the total cost of the scheme (€45.3m) is already reflected in the share price achieved at IPO.
Management believe it is beneficial for the users of the financial statements to understand the underlying operational performance without it being skewed by the impact of the VCP charges. See note 21 for more details on the VCP.
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
5. Operating profit from continuing operations
| Year to | ||
| Year to | 30 September | |
| 30 September | 2023 | |
| 2024 | (Restated) | |
| €000 | €000 | |
| Operating (loss)/profit for the period has been arrived at after charging: | ||
| Expense relating to short-term, low-value and variable leases | 57,316 | 53,704 |
| Depreciation of tangible fixed assets and other items: | ||
| Owned | 182,382 | 147,390 |
| Depreciation of right-of-use assets | 364,757 | 302,940 |
| Impairment of property, plant and equipment | 9,767 | 3,130 |
| Amortisation of other intangibles | 10,646 | 9,572 |
| Impairment of Goodwill | 724,824 | — |
| Impairment of other intangible assets | 38,707 | — |
| Impairment of Right of Use Assets | 6,104 | — |
| Cost of inventories recognised as an expense | 3,419,474 | 3,273,908 |
| Write downs of inventories recognised as an expense | 92,201 | 67,203 |
| Year to | Year to | |
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Auditors’ remuneration | ||
| Fees payable to the Company’s auditors and their associates for the audit of the Company’s annual accounts1 | 538 | 540 |
| Fees payable to the Company’s auditors and their associates for the audit of the Company’s subsidiaries1 | 1,182 | 960 |
| Fees payable to other auditors and their associates for the audit of the Company’s subsidiaries | 782 | 867 |
| Fees payable to other auditors and their associates in the current year in relation to prior year audit | 128 | 244 |
| Total audit fees | 2,630 | 2,611 |
| Audit related services | 165 | 147 |
| Other services | — | 132 |
| Total auditors’ remuneration | 2,795 | 2,890 |
6. Financial income
| Year to | ||
| Year to | 30 September | |
| 30 September | 2023 | |
| 2024 | (Restated) | |
| €000 | €000 | |
| Bank interest income | 22,960 | 2,897 |
| Foreign exchange gains | 8,843 | 7,348 |
| 31,803 | 10,245 |
Audit fees are payable to Forvis Mazars Accountants N.V. the auditors of the Company.
Notes to the consolidated financial statements continued
4. Non-underlying items continued
Impact of implementation of IFRIC interpretation on SaaS arrangements and expensing significant ERP programme costs incurred: Following the IFRIC interpretation on accounting for SaaS costs, the Group has expensed previously capitalised costs in relation to certain SaaS projects as part of the retrospective application of the new accounting policy. In FY23 and FY24, the Group has specifically expensed costs related to significant ERP programmes.
Restructuring costs: The Group undertook strategic decision in the year to restructure the Poundland business. The non-underlying costs relate to head office cost reduction and strategic change to rationalise costs across the business.
Hungary fraud incided: During FY24, the Group incurred a loss due to a fraud incident which occurred in Pepco Hungary. The loss to the business is a non-underlying expense as it was material, exceptional and unusual in nature. All costs have been captured that relate to this issue and classified as non-underlying.
Impairment in Goodwill and Brand: During FY24 the Group have impaired goodwill and brand assets recognised on the acquisition of Poundland. The Group have also impaired Right of use assets and Property, Plant and Equipment relating to Poundland. These are all considered to be non-underlying as they are material, exceptional and unusual in nature.
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
7. Financial expense
| Year to | ||
| Year to | 30 September | |
| 30 September | 2023 | |
| 2024 | (Restated) | |
| €000 | €000 | |
| Interest on bank loans and amortisation of capitalised finance costs | 67,789 | 35,684 |
| Interest on lease liabilities | 77,311 | 60,188 |
| Ineffective element of hedging | (263) | 1,918 |
| Unrealised foreign currency losses on borrowings | (4,052) | (7,240) |
| 140,785 | 90,550 |
8. Staff numbers and costs
The average number of persons employed by the Group (including Directors) during each year was as follows:
| Year to | Year to | |
| 30 September | 30 September | |
| 2024 | 2023 | |
| Administration | 17,780 | 2,458 |
| Selling and distribution | 31,287 | 43,871 |
| 49,067 | 46,329 |
The Group does not have any staff employed in the Netherlands.
The aggregate payroll costs of these persons were as follows:
| Year to | ||
| Year to | 30 September | |
| 30 September | 2023 | |
| 2024 | (Restated) | |
| €000 | €000 | |
| Wages and salaries | 822,196 | 701,527 |
| Social security costs | 109,602 | 91,997 |
| Other pension costs (note 23) | 34,761 | 23,607 |
| Share-based payments expense (note 21) | 6,912 | 1,093 |
| 973,471 | 818,224 |
Key management remuneration
The amounts for remuneration include the following in respect of the key management personnel:
| Other | Post- | |||||
| Short-term | short-term | employment | ||||
| Basic | annual bonus | Company | pension | |||
| remuneration | paid | contributions | contribution | LTIP1 | Total | |
| €000 | €000 | €000 | €000 | €000 | €000 | |
| 2024 | 3,068 | 1,942 | 116 | 125 | 6,184 | 11,435 |
| 2023 | 3,367 | 689 | 85 | 227 | 5,499 | 9,867 |
1
Long Term Incentive Plan; this includes IFRS 2 charges. See note 21 for more details and see Remuneration report (on pages 79 to 83 for Directors’ remuneration in detail.
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
9. Taxation
Analysis of tax (charge)/credit for the year
| Year to | ||
| Year to | 30 September | |
| 30 September | 2023 | |
| 2024 | (Restated) | |
| €000 | €000 | |
| Current tax (charge)/credit | ||
| Current tax on (loss)/profits for the year | (110,944) | (37,451) |
| Adjustments in respect of prior periods | (3,127) | 2,502 |
| Total current tax | (114,071) | (34,949) |
| Deferred tax (charge)/credit | ||
| Origination and reversal of temporary differences | 37,313 | (13,590) |
| De-recognition of previously recognised temporary differences | (28,106) | — |
| Adjustments in respect of prior periods | (2,656) | (1,942) |
| Total deferred tax | 6,551 | (15,532) |
| Total tax charge for the year | (107,520) | (50,481) |
Factors affecting the tax charge for the year
The tax charge for the year differs from the standard rate of
corporation tax in the UK of 25% (2023: 22.0%). The differences are
explained below.
| Year to | ||
| Year to | 30 September | |
| 30 September | 2023 | |
| 2024 | (Restated) | |
| €000 | €000 | |
| (Loss)/profit before tax – continuing operations | (554,119) | 158,845 |
| Expected tax credit/(charge) at the UK statutory rate of 25% (2023: 22.0%) | 138,530 | (34,946) |
| Effects of: | ||
| Movement in unrecognised temporary differences* | (60,920) | (10,363) |
| Expenses not deductible for tax purposes | (7,546) | (10,966) |
| Fixed asset differences** | (183,866) | (2,270) |
| Overseas tax rate differences | 12,065 | 6,489 |
| Adjustments in respect of prior periods*** | (5,783) | 560 |
| Difference in tax rates | - | 1,015 |
| Total tax charge for the year | (107,520) | (50,481) |
*
Included within movement in unrecognised temporary differences is
€28.1 million relating to the partial de-recognition of deferred
tax assets in the UK, Spain and
Poland associated with a re-assessment of recognition in the year
and probability of future recovery. Other movements relate to temporary differences arising in the
current year.
**
Included within fixed asset differences is €181.2 million relating to the
impairment of goodwill recorded in the current year.
Included within adjustments in respect of prior periods is a deferred tax charge of €7.2m and a current
tax credit of €3.5m relating to transfer pricing. This has been
calculated in accordance with IFRIC 23 using the expected value method. The impact results in a reduction in the future deductible
temporary differences (deferred
tax assets) of the Group, which
is partially offset by a current tax credit which should be realisable in
the future.
Tax (charge)/credit recognised in other comprehensive income
| Year to | Year to | |
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Deferred tax (charge)/credit | ||
| Fair value movements on derivative financial instruments | (8,238) | 34,924 |
| Total tax charge recognised in other comprehensive income | (8,238) | 34,924 |
The Company is UK tax resident based on the Company being managed and
controlled in the UK and as such is subject to UK
corporation tax with the expected tax charge reconciled to the UK
statutory rate. Taxation outside the UK is calculated at the rates
prevailing in the respective jurisdictions.
Notes to the consolidated financial statements continued
108
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
9. Taxation continued
Factors that may affect future current and total tax
As a mulinational enterprise the Group falls within the scope of
the global minimum tax rules (Pillar 2) which are now effective in
many
jurisdictions in which the Group operates. Relevant legislation was substantively enacted in the UK on 20 June
2023, effective for accounting periods commencing on or after 31 December 2023. In this respect the rules will be effective for the Group's next
financial year commencing on 1 October 2024.
The Group has operations in Bosnia and Herzegovina, Bulgaria,
Hungary, Isle of Man, Republic of Ireland, and Switzerland, all of
which
currently have a headline tax rate below 15%. Legislation to apply the Pillar 2 rules (including a Qualifying
Domestic Top-Up Tax, QDMTT) has been adopted in Bulgaria, Hungary, and Republic of Ireland,
which will be relevant for the Group's next financial year
commencing on 1 October 2024. Bosnia and Herzegovina was a signatory to the October 2021 OECD
Statement on a Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy but
is yet to publish legislation to implement the rules. The Isle of Man announced its intention to introduce new legislation, including a
QDMTT on 15 October 2024 with effect from 1 January 2025. Switzerland has introduced parts of the Pillar 2 rules, with a QDMTT effective
for the Group's next financial year commencing on 1 October 2024.
The Group has performed a preliminary assessment of the impact of
the rules. Based on this assessment the rules are not expected to
have a significant impact on the Group's financial statements,
either as a result of available safe harbours or substance-based
exclusions.
There is no current tax impact of the rules on the Group's
financial statements for the financial year ended 30 September
2024. The
Group has applied a temporary mandatory relief from deferred tax
accounting for the impacts of the global minimum tax and accounts
for it as a current tax when it is incurred.
10. Property, plant and equipment
| Leasehold | Fixtures | |||
| Land and | property | and | ||
| buildings | improvements | equipment | Total | |
| €000 | €000 | €000 | €000 | |
| Cost | ||||
| Balance at 1 October 2022 | 60,969 | 342,615 | 517,843 | 921,427 |
| Additions | 176 | 178,908 | 184,739 | 363,823 |
| Disposals | — | (6,029) | (31,032) | (37,061) |
| Differences on translation | 1 | 11,107 | 8,686 | 19,794 |
| Balance at 30 September 2023 | 61,146 | 526,601 | 680,236 | 1,267,983 |
| Balance at 1 October 2023 | 61,146 | 526,601 | 680,236 | 1,267,983 |
| Additions | 6,988 | 91,738 | 105,833 | 204,559 |
| Disposals | (77) | (22,590) | (33,012) | (55,679) |
| Reclassification | 29,706 | (29,706) | — | — |
| Differences on translation | (11,572) | 29,221 | 19,509 | 37,158 |
| Balance at 30 September 2024 | 86,191 | 595,264 | 772,566 | 1,454,021 |
| Depreciation and impairment | ||||
| Balance at 1 October 2022 | 1,429 | 121,022 | 274,426 | 396,877 |
| Charge for the period | 572 | 59,505 | 91,730 | 151,807 |
| Disposals | — | (6,073) | (29,544) | (35,617) |
| Impairment | — | — | (3,130) | (3,130) |
| Differences on translation | 4 | 1,035 | 10,570 | 11,609 |
| Balance at 30 September 2023 | 2,005 | 175,489 | 344,052 | 521,546 |
| Balance at 1 October 2023 | 2,005 | 175,489 | 344,052 | 521,546 |
| Charge for the period | 2,904 | 79,876 | 99,602 | 182,382 |
| Disposals | (125) | (10,973) | (23,979) | (35,077) |
| Reclassification | 9,847 | (9,847) | — | — |
| Impairment | — | 9,767 | — | 9,767 |
| Differences on translation | (2,195) | 31,449 | 3,316 | 32,570 |
| Balance at 30 September 2024 | 12,436 | 275,761 | 422,991 | 711,188 |
| Net book value | ||||
| Balance at 30 September 2024 | 73,755 | 319,503 | 349,575 | 742,833 |
| Balance at 30 September 2023 | 59,141 | 351,112 | 336,184 | 746,437 |
An impairment was recognised in the year of €9.8m (2023:
€3.1m) as a result of the closure and rebranding of certain
stores.
A reclassification has been included in the FY24 categories
for 'Land and Buildings', and 'Leasehold Property
Improvements' as it was
identified that certain building assets were not included
in the correct category.
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
11. Goodwill and other intangible assets
| Software and | ||||
| Goodwill1 | Brand1 | trademarks | Total | |
| €000 | €000 | €000 | €000 | |
| Cost | ||||
| Balance at 1 October 2022 | 803,169 | 124,423 | 48,009 | 975,601 |
| Additions | — | — | 25,815 | 25,815 |
| Disposals | — | — | (6,853) | (6,853) |
| Differences on translation | 17,112 | 2,646 | 1,942 | 21,700 |
| Balance at 30 September 2023 | 820,281 | 127,069 | 68,913 | 1,016,263 |
| Balance at 1 October 2023 | 820,281 | 127,069 | 68,913 | 1,016,263 |
| Additions | — | — | 7,189 | 7,189 |
| Disposals | — | — | (1,033) | (1,033) |
| Differences on translation | 21,164 | 4,433 | 3,616 | 29,213 |
| Balance at 30 September 2024 | 841,445 | 131,502 | 78,685 | 1,051,632 |
| Amortisation and impairment | ||||
| Balance at 1 October 2022 | 114,188 | 12,444 | 34,731 | 161,363 |
| Amortisation for the period | — | 3,284 | 6,288 | 9,572 |
| Impairments | — | — | (5,742) | (5,742) |
| Differences on translation | 2,433 | 288 | 872 | 3,593 |
| Balance at 30 September 2023 | 116,621 | 16,016 | 36,149 | 168,786 |
| Balance at 1 October 2023 | 116,621 | 16,016 | 36,149 | 168,786 |
| Amortisation for the period | — | 3,246 | 7,400 | 10,646 |
| Disposals | — | — | (380) | (380) |
| Impairments | 724,824 | 38,088 | 619 | 763,531 |
| Differences on translation | — | 854 | 879 | 1,733 |
| Balance at 30 September 2024 | 841,445 | 58,204 | 44,667 | 944,316 |
| Net book value | ||||
| Balance at 30 September 2024 | — | 73,298 | 34,018 | 107,316 |
| Balance at 30 September 2023 | 703,660 | 111,053 | 32,764 | 847,477 |
Impairment
Under IAS 36 “Impairment of Assets”, the Group is required to:
•
•
As part of the annual impairment review, the carrying value of
the assets or, if they do not generate independent cash flows
individually,
the carrying value of the cash-generating unit (CGU) that they
belong to is compared to their recoverable amount.
CGUs represent the smallest identifiable group of assets that
generate cash flows that are largely independent of cash flows
from other
groups of assets. In accordance with internal management
structures, the group of CGUs against which goodwill is
monitored comprises the Poundland Group, which is aligned with the level at which
the Directors monitor that goodwill.
The recoverable amount represents the higher of the CGU’s fair
value less the cost of disposal and value in use. The recoverable
amount has
been determined based on the CGU's fair value less the cost of
diposal as using this methodology provides a higher value as
required by IFRS accounting standards. Where the recoverable amount is less than
the carrying value, an impairment results. Goodwill acquired in
a business combination is allocated to groups of CGUs according
to the level at which the Directors monitor that goodwill.
During the year, all goodwill was tested for impairment and the
full goodwill balance has been impaired (2023: €Nil).
The key assumptions on which the fair value less the costs of
disposal calculations is based on various fair value methodologies
such as
EBITDA multiples and recent transactions. These are to be level 3 fair value inputs. The range of EBITDA multiples considered appropriate for the fair value calculation were between 8.5x and 9.5x EBITDA (pre-IFRS16).
The impairment in the year has largely been driven by the
material underperformance in Poundland, along with slower growth
prospects
and a higher cost outlook in the UK following the recent
government budget. This has led to the VIU model producing a
lower value than the fair value less cost of disposal model.
As a result of the impairment calculation for goodwill, the
impairment required exceeded the carrying value of goodwill. The
surplus
impairment has been allocated to the brand asset given it is
part of the CGU and due to the fact that other impairments have
been recognised in the year in relation to this CGU within 'Plant,
Property and Equipment' and 'Right of use assets'.
Brand and goodwill relate to the acquisition of the
Poundland Group, Fultons Group and Poundshop.com.
review its intangible assets in the event of a significant
change in circumstances that would indicate potential
impairment; and
review and test its goodwill and indefinite-life intangible
assets annually or in the event of a significant change in
circumstances.
Notes to the consolidated financial statements continued
110
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
12. Leases
Right-of-use assets
| Buildings | Equipment | Vehicles | Total | |
| €000 | €000 | €000 | €000 | |
| Cost | ||||
| Balance at 1 October 2022 | 1,652,389 | 27,729 | 23,118 | 1,703,236 |
| Additions | 417,880 | 17,424 | 4,692 | 439,996 |
| Disposals | (95) | — | — | (95) |
| Differences on translation | 83,688 | 443 | 689 | 84,820 |
| Balance at 30 September 2023 | 2,153,862 | 45,596 | 28,499 | 2,227,957 |
| Balance at 1 October 2023 | 2,153,862 | 45,596 | 28,499 | 2,227,957 |
| Additions | 393,204 | 6,040 | 3,959 | 403,203 |
| Disposals | (52,300) | — | (150) | (52,450) |
| Differences on translation | 114,282 | 1,728 | 1,163 | 117,173 |
| Balance at 30 September 2024 | 2,609,048 | 53,364 | 33,471 | 2,695,883 |
| Depreciation | ||||
| Balance at 1 October 2022 | 651,065 | 21,072 | 12,858 | 684,995 |
| Depreciation for the period | 302,194 | 4,267 | 2,539 | 309,000 |
| Disposals | (104) | — | — | (104) |
| Differences on translation | 7,370 | 771 | 242 | 8,383 |
| Balance at 30 September 2023 | 960,525 | 26,110 | 15,639 | 1,002,274 |
| Balance at 1 October 2023 | 960,525 | 26,110 | 15,639 | 1,002,274 |
| Depreciation for the period | 356,955 | 4,666 | 3,136 | 364,757 |
| Disposals | (11,625) | — | (17) | (11,642) |
| Impairment | 6,104 | — | — | 6,104 |
| Differences on translation | 27,085 | 1,658 | 969 | 29,712 |
| Balance at 30 September 2024 | 1,339,044 | 32,434 | 19,727 | 1,391,205 |
| Net book value | ||||
| Balance at 30 September 2024 | 1,270,004 | 20,930 | 13,744 | 1,304,678 |
| Balance at 30 September 2023 | 1,193,337 | 19,486 | 12,860 | 1,225,683 |
An impairment was recognised in the year of €6.1m (2023: nil) as a result of the expected store closures and impairment reviews on loss makings stores.
Lease liabilities
| Year to | Year to | |
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| At beginning of period | 1,293,171 | 1,133,544 |
| Additions | 470,038 | 469,203 |
| Interest on lease liability | 77,311 | 61,367 |
| Repayment of lease liability | (441,585) | (386,961) |
| Disposal | (35,521) | — |
| Differences on translation | 17,575 | 16,018 |
| At end of period | 1,380,989 | 1,293,171 |
| Current | 346,594 | 304,794 |
| Non-current | 1,034,395 | 988,377 |
| 1,380,989 | 1,293,171 |
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
12. Leases continued
Amounts recognised in the income statement
| Year to | Year to | |
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Interest expenses (included in finance cost) | 77,311 | 61,367 |
| Expense relating to short-term leases (included in cost of goods sold and administrative expenses) | 1,840 | 603 |
| Expense relating to leases of low-value assets that are not shown above as short-term leases (included | ||
| in administrative expenses) | 221 | 2,153 |
| Expense relating to variable lease payments not included in lease liabilities (included in administrative expenses) | 55,256 | 50,948 |
Amounts recognised in the statement of cash flows
| Year to | Year to | |
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Total cash outflow for leases | 441,585 | 386,961 |
The Group leases various retail stores, offices and vehicles under non-cancellable operating leases. The leases have varying terms, escalating clauses and renewal rights. On renewal, the terms of the leases are renegotiated. The Group has recognised right-of-use assets for these leases, except for short-term and low-value leases.
Some property leases contain variable payment terms that are linked to sales generated from a store. Variable payment terms’ percentages range from 1.5% to 7.5% of sales. Variable payment terms are used for a variety of reasons, including minimising the fixed cost base for newly established stores. Variable lease payments that depend on sales are recognised in profit or loss in the period in which the condition that triggers those payments occurs.
Extension and termination options are included in a number of property and equipment leases across the Group. These are used to maximise operational flexibility in terms of managing the assets used in the Group’s operations. The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor.
13. Inventories
| 30 September | ||
| 30 September | 2023 | |
| 2024 | (Restated) | |
| €000 | €000 | |
| Goods purchased for resale | 756,311 | 724,822 |
| Goods in transit | 479,146 | 394,725 |
| 1,235,457 | 1,119,547 |
Inventories have been reduced by €64,834k (2023: €70,543k) as a result of the write-down to net realisable value.
1
4
. Trade and other receivables
| 30 September | ||
| 30 September | 2023 | |
| 2024 | (Restated) | |
| €000 | €000 | |
| Non-current trade and other receivables | ||
| Other receivables | 52 | 46 |
| 52 | 46 | |
| Current trade and other receivables | ||
| Trade receivables | 4,991 | 2,624 |
| Other receivables | 27,184 | 30,064 |
| Prepayments | 70,699 | 110,444 |
| 102,874 | 143,132 |
As the principal business of the Group is retail sales made in cash or with major credit cards, the Group’s trade receivables are small and therefore credit risk primarily consists of accrued income and cash and cash equivalents. Accordingly, the Group does not systematically report outstanding receivables analysed by credit quality, in particular with respect to the credit quality of financial assets that are neither past due nor impaired.
The carrying amount of trade and other receivables recorded in the financial statements represents the Group’s maximum exposure to credit risk and any associated impairments are immaterial.
Notes to the consolidated financial statements continued
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
15. Trade and other payables
| 30 September | ||
| 30 September | 2023 | |
| 2024 | (Restated) | |
| €000 | €000 | |
| Current | ||
| Trade payables1 | 886,966 | 770,333 |
| Other taxation and social security | 71,724 | 64,923 |
| Other payables | 81,326 | 141,031 |
| Accruals | 340,503 | 294,015 |
| 1,380,519 | 1,270,302 | |
| Non-current | ||
| Accruals and deferred income | 3,396 | 21,763 |
| 3,396 | 21,763 |
1 Trade payables includes €383m (FY23: €212m) payable to suppliers utilising the Supply Chain Financing Programme implemented by the Group.
16. Borrowings
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Current | ||
| Borrowings from credit institutions | — | 118,794 |
| Non-current | ||
| Borrowings from credit institutions | 248,230 | 248,259 |
| Secured bond issuance | 364,750 | 362,011 |
Included within non-current liabilities are loans from credit institutions of €250m (2023: €250m) and a secured bond of €375m (2023: €375m). Costs incurred in obtaining the loans from credit institutions and the secured bond have been capitalised and are allocated to the Consolidated income statement over the life of the debt facility. At 30 September 2024 borrowings are stated net of unamortised issue costs of €12.0m (2023: €14.7m).
Interest is being charged on borrowings from credit institutions at an effective rate of 6.85%. These loans contains financial covenants which are typical for this type of facility and include minimum leverage and interest cover. The Group remained compliant with these covenants for the year ended 30 September 2024. The loans from credit institutions are secured over the shares of material overseas subsidiaries and debentures over other assets of the Group. There has been no significant impact to the Group as a result of interest rate benchmark reform.
The secured bond issuance matures in June 2028 and has a fixed interest rate of 7.25%.
17. Financial instruments and related disclosures
Financial risk management
The Directors have overall responsibility for the oversight of the Group’s risk management framework. A formal process for reviewing and managing risk in the business has been developed. A register of strategic and operational risk is maintained and reviewed by the Directors, who also monitor the status of agreed actions to mitigate key risks.
Credit risk
Credit risk is the risk of financial loss to the Group if a counterparty to a financial instrument fails to meet its contractual obligation. This risk arises from the Group’s foreign exchange and commodity hedging agreements.
As the principal business of the Group is cash sales the Group’s trade receivables are small. The carrying amount of financial assets recorded in the financial statements represents the Group’s maximum exposure to credit risk and any associated impairments are minimal.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group ensures that it has sufficient cash or loan facilities to meet all its commitments when they fall due by ensuring that there is sufficient cash or working capital facilities to meet the cash requirements of the Group for the current business plan.
The risk is measured by review of forecast liquidity each month to determine whether there are sufficient credit facilities to meet forecast requirements and by monitoring covenants on a regular basis. Cash flow forecasts are submitted monthly to the Directors. These continue to demonstrate the cash-generating ability of the business and its ability to operate within existing agreed facilities.
Market risk
Market risk is the risk that changes in the market prices will affect the Group’s income. The Group’s exposure to market risk predominantly relates to interest and currency risk.
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17. Financial instruments and related disclosures continued
Interest rate risk
The Group’s external borrowings includes loans which incur variable interest rate charges linked to Euribor which are added to the loan. Interest rate risk is measured by sensitivity analysis. The Group’s policy aims to manage the interest cost of the Group within the business plan. The Group does not utilise interest rate swaps to hedge interest rate risks.
The table below shows the interest rate risk profile for the Group’s financial instruments:
| 2024 | 2023 | |
| €000 | €000 | |
| Cash and cash equivalents | 363,336 | 330,417 |
| Borrowings | (612,980) | (729,064) |
| Finance lease liabilities | (1,380,989) | (1,293,171) |
| Total | (1,630,633) | (1,691,818) |
Interest rate sensitivity analysis
The table below shows the Group’s sensitivity to interest rates on floating rate borrowings (i.e. cash and cash equivalents and bank borrowings which attract interest at floating rates) if interest rates were to change by +/-1%. The following assumptions were made in calculating the sensitivity analysis:
•
| 2024 | 2023 | 2024 | 2023 | |
| (decrease)/ | (decrease)/ | (decrease)/ | (decrease)/ | |
| Increase | Increase | increase | increase | |
| in income | in income | in equity | in equity | |
| €000 | €000 | €000 | €000 | |
| +1% movement in interest rates | (3,633) | (3,304) | (2,482) | (3,671) |
| -1% movement in interest rates | 3,633 | 3,304 | 2,482 | 3,671 |
Foreign currency risk
The Group has a significant transaction exposure to directly sourced purchases from its suppliers in the Far East, with most of the trade being in US Dollars and Chinese Yuan. The Group’s policy allows these exposures to be hedged for up to 18 months forward in order to fix the cost in Polish Zloty and Pound Sterling. Hedging is performed through the use of foreign currency bank accounts and forward foreign exchange contracts. See below for further details on FX hedge accounting.
The Group does not hedge either economic exposure or the translation exposure arising from the profits, assets and liabilities of its businesses.
The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date is as follows:
| 30 September 2024 | 30 September 2023 | |||||||
| GBP | EUR | PLN | Others | GBP | EUR | PLN | Others | |
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | |
| Cash and Cash | ||||||||
| equivalents | 163,353 | (26,308) | 11,718 | 214,573 | 21,251 | 127,634 | 18,580 | 162,952 |
| Trade and other | ||||||||
| receivables | 63,769 | 25,318 | 4,178 | 9,661 | 101,658 | 25,777 | 23,415 | (7,282) |
| Borrowings | — | (612,980) | — | — | — | (729,064) | — | — |
| Trade and other | ||||||||
| payables | (294,856) | (117,041) | (863,693) | (108,325) | (274,613) | (98,088) | (707,177) | (208,211) |
| Provisions | (6,473) | (3,944) | (22,095) | (1,759) | (12,501) | (4,314) | (12,284) | (1,474) |
| Finance Lease | ||||||||
| liabilities | (282,436) | (900,641) | (152,698) | (45,214) | (286,749) | (225,796) | (738,329) | (42,297) |
| (356,643) | (1,635,596) | (1,022,590) | 68,936 | (450,954) | (903,851) | (1,415,795) | (96,312) | |
Significant exchange rates used
| Year to | Year to | |
| 30 September | 30 September | |
| 2024 | 2023 | |
| Average rate for the year | ||
| Polish Zloty | 4.33 | 4.62 |
| Pound Sterling | 0.86 | 0.87 |
| Statement of financial position rates | ||
| Polish Zloty | 4.28 | 4.63 |
| Pound Sterling | 0.84 | 0.86 |
it is assumed interest is receivable on the entirety of the Group’s cash balances; and
the impact is reflected on net assets (gross of tax).
Notes to the consolidated financial statements continued
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17. Financial instruments and related disclosures continued
Pension liability risk
The Group has no association with any defined benefit pension scheme and therefore carries no deferred, current or future liabilities in respect of such a scheme. The Group operates a number of Group personal pension plans for its employees.
Capital risk management
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to optimise returns to its shareholders. The Board’s policy is to retain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future growth. The Board regularly monitors the level of capital in the Group to ensure that this can be achieved. Refer to note 16 for loan covenant requirements.
The Group monitors capital using net debt. This is because the Group believes this measure provides an indicator of the overall strength of its balance sheet and can be used to assess its earnings as compared to its indebtedness as defined by the Group’s financing agreements. Please refer to note 27 where the calculation of net debt is disclosed.
Fair value disclosures
The fair value of each class of financial assets and liabilities approximates the carrying amount, based on the following assumptions:
| Trade receivables, trade payables, short-term | The fair value approximates to the carrying value because of the short maturity of these |
| deposits and borrowings | instruments. |
| The fair value of bank loans and other loans approximates to the carrying value reported | |
| Long-term borrowings | in the statement of financial position. |
•
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
•
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
All financial instruments carried at fair value have been measured using a Level 2 valuation method.
The fair value of financial assets and liabilities are as follows:
| Year to | Year to | |
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Financial assets measured at fair value | ||
| Derivative contracts used for hedging (assets) | 34,507 | 48,338 |
| Financial assets not measured at fair value | ||
| Cash and cash equivalents | 363,336 | 330,417 |
| Trade and other receivables | 32,227 | 32,734 |
| Total financial assets | 430,070 | 411,879 |
| Financial liabilities measured at fair value | ||
| Derivative contracts used for hedging (liabilities) | 52,486 | 92,775 |
| Financial liabilities not measured at fair value | ||
| Trade and other payables | 1,383,915 | 1,292,065 |
| Borrowings at amortised cost | 612,980 | 729,064 |
| Finance lease liabilities | 1,380,989 | 1,293,171 |
| Total financial liabilities | 3,430,370 | 3,407,075 |
Financial instrument sensitivity analysis
In managing interest rate and currency risks the Group aims to reduce the impact of short-term fluctuations on its earnings. At the end of each reporting period, the effects of hypothetical changes in interest and currency rates are as follows:
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Fair value hierarchy
•
Foreign exchange rate sensitivity analysis
The table below shows the Group’s sensitivity to foreign exchange rates for its Polish Zloty and Pound Sterling financial instruments, the major currencies in which the Group’s assets and liabilities are denominated:
| 2024 increase/ | 2023 increase/ | |
| (decrease) | (decrease) | |
| in equity | in equity | |
| €000 | €000 | |
| 10% appreciation of the Euro against the Polish Zloty | 113,621 | 157,311 |
| 10% depreciation of the Euro against the Polish Zloty | (113,621) | (157,311) |
| 10% appreciation of the Euro against Pound Sterling | 39,627 | 50,106 |
| 10% depreciation of the Euro against Pound Sterling | (39,627) | (50,106) |
A strengthening/weakening of the Euro, as indicated, against the Polish Zloty at each year end would have increased/(decreased) the equity by the amounts shown above. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant.
A strengthening/weakening of the Euro, as indicated, against Pound Sterling at each year end would have increased/(decreased) the equity by the amounts shown above. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant.
Contractual cash flows
The contractual maturity of bank borrowings including interest payments and trade payables, excluding the impact of netting agreements, is shown below:
| 30 September 2024 | ||||
| Expiring | ||||
| Due in | between | Expiring | ||
| less than | one to five | after five | ||
| one year | years | years | Total | |
| €000 | €000 | €000 | €000 | |
| Borrowings | 32,261 | 702,580 | — | 734,841 |
| Trade and other payables | 1,380,518 | 3,397 | — | 1,383,915 |
| Lease liabilities | 389,038 | 853,018 | 258,937 | 1,500,994 |
| 1,801,817 | 1,558,995 | 258,937 | 3,619,750 | |
| 30 September 2023 | ||||
| Expiring | ||||
| Due in | between | Expiring | ||
| less than | one to five | after five | ||
| one year | years | years | Total | |
| €000 | €000 | €000 | €000 | |
| Borrowings | 155,804 | 732,893 | — | 888,697 |
| Trade and other payables | 1,266,195 | 21,894 | — | 1,288,089 |
| Lease liabilities | 377,379 | 823,170 | 347,267 | 1,547,816 |
| 1,799,378 | 1,577,957 | 347,267 | 3,724,602 | |
Notes to the consolidated financial statements continued
1
7
. Financial instruments and related disclosures
continued
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17. Financial instruments and related disclosures continued
Derivatives and hedge accounting
The Group uses foreign currency forward contracts and commodity hedges to manage risks arising from changes in foreign currency exchange rates (relating to the purchase of overseas sourced products) and fuel price fluctuations. These have been designated as cash flow hedges with the respective underlying risks identified in accordance with the hedging strategy discussed as part of the financial risk management.
Hedge effectiveness is determined at the inception of the hedge relationship and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument.
Hedge ineffectiveness may occur due to:
a) the fair value of the hedging instrument on the hedge relationship designation date if the fair value is not €Nil;
b) changes in the contractual terms or timing of the payments on the hedged item; and
c) a change in the credit risk of the Group or the counterparty with the hedging instrument.
The following table represents the net carrying values and nominal amounts of derivatives in a continued hedge relationship as at 30 September:
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Derivative financial assets at beginning of period | (44,437) | 125,240 |
| Recognised in the income statement - cost of sales | (85,240) | (128,442) |
| Recognised in the income statement - other finance income/(expense) | 2,688 | (1,427) |
| Recognised in other comprehensive income | 121,518 | (38,060) |
| Cash flow hedge adjustment to inventory | (14,350) | — |
| Translation differences | 1,842 | (1,748) |
| Derivative financial (liabilities)/assets at end of period | (17,979) | (44,437) |
The below table illustrates the notional value of the hedged exposure.
| 30 September 2024 | |||||
| EUR | USD | CNY | Other | Total | |
| €000 | €000 | €000 | €000 | €000 | |
| Maturing in less than one year | (1,190,314) | 683,074 | 865,745 | (324,011) | 34,494 |
| Maturing in greater than one year | (115,000) | 114,862 | 114,506 | (10,000) | 104,368 |
| Total | (1,305,314) | 797,936 | 980,251 | (334,011) | 138,862 |
| 30 September 2023 | |||||
| EUR | USD | CNY | Other | Total | |
| €000 | €000 | €000 | €000 | €000 | |
| Maturing in less than one year | (677,764) | 683,834 | 601,071 | (367,786) | 239,355 |
| Maturing in greater than one year | (47,000) | 92,505 | 65,027 | (43,370) | 67,162 |
| Total | (724,764) | 776,339 | 666,098 | (411,156) | 306,517 |
The following tables provide an analysis of the anticipated contractual cash flows for the Group’s derivative contracts:
| 30 September 2024 | 30 September 2023 | |||
| Payable | Receivable | Payable | Receivable | |
| EUR | €000 | €000 | €000 | €000 |
| Due in less than one year | (824) | 21,957 | (10,850) | 14,371 |
| Expiring between one and two years | (68) | 506 | (1,014) | (1,637) |
| Contractual cash flows | (892) | 22,463 | (11,864) | 12,734 |
| Fair value | (892) | 22,463 | (11,864) | 12,734 |
| 30 September 2024 | 30 September 2023 | |||
| Payable | Receivable | Payable | Receivable | |
| USD | €000 | €000 | €000 | €000 |
| Due in less than one year | (25,172) | 129 | (20,911) | 10,165 |
| Expiring between one and two years | (952) | 81 | — | 3,258 |
| Contractual cash flows | (26,124) | 210 | (20,911) | 13,423 |
| Fair value | (26,124) | 210 | (20,911) | 13,423 |
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Derivatives and hedge accounting continued
| 30 September 2024 | 30 September 2023 | |||
| Payable | Receivable | Payable | Receivable | |
| CNY | €000 | €000 | €000 | €000 |
| Due in less than one year | (24,931) | 2,697 | (55,652) | 7,707 |
| Expiring between one and two years | (207) | 962 | — | 2,982 |
| Contractual cash flows | (25,138) | 3,659 | (55,652) | 10,689 |
| Fair value | (25,138) | 3,659 | (55,652) | 10,689 |
| 30 September 2024 | 30 September 2023 | |||
| Payable | Receivable | Payable | Receivable | |
| Other | €000 | €000 | €000 | €000 |
| Due in less than one year | (333) | 7,958 | (3,632) | 9,863 |
| Expiring between one and two years | — | 218 | (716) | 1,629 |
| Contractual cash flows | (333) | 8,176 | (4,348) | 11,492 |
| Fair value | (333) | 8,176 | (4,348) | 11,492 |
| 30 September 2024 | 30 September 2023 | |||
| Payable | Receivable | Payable | Receivable | |
| Total | €000 | €000 | €000 | €000 |
| Due in less than one year | (51,260) | 32,741 | (91,045) | 42,106 |
| Expiring between one and two years | (1,227) | 1,766 | (1,730) | 6,232 |
| Contractual cash flows | (52,487) | 34,507 | (92,775) | 48,338 |
| Fair value | (52,487) | 34,507 | (92,775) | 48,338 |
Changes in liabilities arising from financing activities
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s Consolidated cash flow statement as cash flows from financing activities.
| Borrowings | Total liabilities | ||
| from credit | from financing | ||
| Lease liabilities | institutions | activities | |
| €000 | €000 | €000 | |
| At 30 September 2023 | (1,293,171) | (729,064) | (2,022,235) |
| Financing cash flows1 | 364,274 | 120,000 | 484,274 |
| Interest cash flows1 | 77,311 | 56,184 | 133,495 |
| Other changes2 | (547,206) | (60,100) | (607,306) |
| Foreign exchange | 17,803 | — | 17,803 |
| At 30 September 2024 | (1,380,989) | (612,980) | (1,993,969) |
| Borrowings | Total liabilities | ||
| from credit | from financing | ||
| Lease liabilities | institutions | activities | |
| €000 | €000 | €000 | |
| At 30 September 2022 | (1,133,544) | (614,542) | (1,748,086) |
| Financing cash flows1 | 325,594 | (116,215) | 209,379 |
| Interest cash flows1 | 61,367 | 18,809 | 80,176 |
| Other changes2 | (530,570) | (17,116) | (547,686) |
| Foreign exchange | (16,018) | — | (16,018) |
| At 30 September 2023 | (1,293,171) | (729,064) | (2,022,235) |
The financing cash flows from borrowings from credit institutions make up the net amount of proceeds from borrowings and repayments of borrowings and are presented in the cash flow statement on a gross basis. Interest cash flows for these liabilities are presented separately.
Notes to the consolidated financial statements continued
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
17. Financial instruments and related disclosures continued
Financial assets and liabilities by category as at 30 September 2024
| Fair value | |||
| through | |||
| Amortised | Fair value | income | |
| cost | through OCI | statement | |
| Non-current financial assets | |||
| Derivative financial instruments1 | — | 1,766 | — |
| Trade and other receivables | 52 | — | — |
| 52 | 1,766 | — | |
| Current financial assets | |||
| Trade and other receivables | 32,175 | — | — |
| Derivative financial instruments1 | — | 32,741 | — |
| Cash and cash equivalents | 363,336 | — | — |
| 395,511 | 32,741 | — | |
| Non-current financial liabilities | |||
| Borrowings | 612,980 | — | — |
| Lease liabilities | 1,034,395 | — | — |
| Derivative financial instruments1 | — | 1,227 | — |
| Trade and other payables | 3,396 | — | — |
| 1,650,771 | 1,227 | — | |
| Current financial liabilities | |||
| Borrowings | — | — | — |
| Lease liabilities | 346,594 | — | — |
| Derivative financial instruments1 | — | 51,259 | — |
| Trade and other payables | 1,380,519 | — | — |
| 1,727,113 | 51,259 | — |
Derivative financial instruments relate to cash flow hedge.
Financial assets and liabilities by category as at 30 September 2023
| Fair value | |||
| through | |||
| Amortised | Fair value | income | |
| cost | through OCI | statement | |
| Non-current financial assets | |||
| Derivative financial instruments1 | — | 6,232 | — |
| Trade and other receivables | 46 | — | — |
| 46 | 6,232 | — | |
| Current financial assets | |||
| Trade and other receivables | 32,688 | — | — |
| Derivative financial instruments1 | — | 42,106 | — |
| Cash and cash equivalents | 330,417 | — | — |
| 363,105 | 42,106 | — | |
| Non-current financial liabilities | |||
| Borrowings | 610,270 | — | — |
| Lease liabilities | 988,377 | — | — |
| Derivative financial instruments1 | — | 1,730 | — |
| Trade and other payables | 21,763 | — | — |
| 1,620,410 | 1,730 | — | |
| Current financial liabilities | |||
| Borrowings | 118,794 | — | — |
| Lease liabilities | 304,794 | — | — |
| Derivative financial instruments1 | — | 91,045 | — |
| Trade and other payables | 1,270,302 | — | — |
| 1,693,890 | 91,045 | — |
Derivative financial instruments relate to cash flow hedge.
119
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
18. Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and (liabilities) are attributable to the following:
| 30 September | 30 September | |
| 2024 | 2023 | |
| (Restated) | ||
| €000 | €000 | |
| Net deferred tax assets at beginning of period | 113,414 | 91,296 |
| Recognised in the income statement (note 9) | 6,551 | (15,532) |
| Recognised in other comprehensive income (note 9) | (8,238) | 34,924 |
| Discontinued operations | (9,692) | 5,748 |
| Exchange differences | 4,399 | (3,022) |
| Net deferred tax assets at end of period | 106,434 | 113,414 |
| Deferred tax assets | Deferred tax liabilities | Net | ||||
| 30 September | 30 September | 30 September | 30 September | 30 September | 30 September | |
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |
| (Restated) | (Restated) | (Restated) | ||||
| €000 | €000 | €000 | €000 | €000 | €000 | |
| Property, plant and equipment | 34,002 | 37,443 | (1,306) | (1,763) | 32,696 | 35,680 |
| Intangible assets | — | — | (18,324) | (28,167) | (18,324) | (28,167) |
| Right of use assets & lease liabilities IFRS16 | 197,595 | 201,556 | (190,649) | (194,857) | 6,946 | 6,699 |
| Provisions | 44,709 | 21,418 | — | — | 44,709 | 21,418 |
| Financial assets and liabilities | 4,533 | 14,105 | — | (1,054) | 4,533 | 13,051 |
| Tax losses and other temporary differences | 35,874 | 64,733 | — | — | 35,874 | 64,733 |
| 316,713 | 339,255 | (210,279) | (225,841) | 106,434 | 113,414 | |
A deferred tax asset is recognised by the Group where future recoverability is considered probable. Deferred tax assets and liabilities are not discounted. The restatement of prior year figures in the current year is to reflect certain amendments to IAS 12 (Deferred Tax related to Assets and Liabilities arising from a Single Transaction) with respect to IFRS 16.
| Recognised in | ||||||
| 1 October | Recognised in | other | ||||
| 2023 | income | comprehensive | Discontinued | Exchange | 30 September | |
| (Restated) | statement | income | Operations | differences | 2024 | |
| €000 | €000 | €000 | €000 | €000 | €000 | |
| Property, plant and equipment | 35,680 | (6,439) | — | — | 3,455 | 32,696 |
| Intangible assets | (28,167) | 10,533 | — | — | (690) | (18,24) |
| Right of use assets & lease liabilities IFRS16 | 6,699 | 296 | — | (212) | 163 | 6,946 |
| Provisions | 21,418 | 18,284 | — | — | 5,007 | 44,709 |
| Financial assets and liabilities | 13,051 | 546 | (8,238) | — | (826) | 4,533 |
| Tax losses and other temporary differences | 64,733 | (16,669) | — | (9,480) | (2,710) | 35,874 |
| 113,414 | 6,551 | (8,238) | (9,692) | 4,399 | 106,434 |
| Recognised in | ||||||
| Recognised in | other | |||||
| 1 October | income | comprehensive | Discontinued | Exchange | 30 September | |
| 2022 | statement | income | Operations | differences | 2023 | |
| €000 | €000 | €000 | €000 | €000 | €000 | |
| Property, plant and equipment | 33,794 | 8,645 | — | — | (6,759) | 35,680 |
| Intangible assets | (27,985) | 411 | — | — | (593) | (28,167) |
| Right of use assets & lease liabilities IFRS16 | 6,158 | (681) | — | — | 1,222 | 6,699 |
| Provisions | 41,417 | (20,807) | — | — | 808 | 21,418 |
| Financial assets and liabilities | (20,180) | (1,397) | 34,924 | — | (296) | 13,051 |
| Tax losses and other temporary differences | 58,092 | (1,703) | — | 5,748 | 2,596 | 64,733 |
| 91,296 | (15,532) | 34,924 | 5,748 | (3,022) | 113,414 |
Deferred tax not recognised
Notes to the consolidated financial statements continued
120
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
19. Provisions
| Property provisions | Other provisions | Total | ||||
| 30 September | 30 September | 30 September | 30 September | 30 September | 30 September | |
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |
| €000 | €000 | €000 | €000 | €000 | €000 | |
| At beginning of period | 12,800 | 12,502 | 17,773 | 35,263 | 30,573 | 47,765 |
| Provisions made during the period | 476 | 56 | 27,120 | 523 | 27,596 | 579 |
| Provisions utilised during the period | — | — | (4,263) | (6,039) | (4,263) | (6,039) |
| Provisions reversed during the period | (6,259) | (3,576) | (15,348) | (14,930) | (21,607) | (18,506) |
| Translation differences | 337 | 3,818 | 1,635 | 2,956 | 1,972 | 6,774 |
| 7,354 | 12,800 | 26,917 | 17,773 | 34,271 | 30,573 | |
| Current | 3,986 | 1,352 | 16,518 | 902 | 20,504 | 2,254 |
| Non-current | 3,368 | 11,448 | 10,399 | 16,871 | 13,767 | 28,319 |
| 7,354 | 12,800 | 26,917 | 17,773 | 34,271 | 30,573 | |
Provision is made for the exit costs of properties no longer
occupied by the Group where there is a contractual obligation to
restore the
property back to its original condition. The average remaining
lease term for these properties is 2.8 years (2023: 1.2 years).
Other provisions include long-term employee benefits where cash
settlement is based on the Directors’ best estimate of future
cash flows
of the Pepco business. The utilisation is expected within the
following five years.
20. Share capital and premium
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Ordinary share capital | ||
| Allotted, Issued, and fully paid | ||
| 576,027,342 (2023: 576,027,342) A ordinary shares of €0.01 each | 5,760 | 5,760 |
| Share capital | |||||
| Nominal value | Share premium | Merger reserve | |||
| € | Shares (‘000) | €000 | €000 | €000 | |
| At 30 September 2023 | €0.01 | 576,027 | 5,760 | 13 | (751) |
| At 30 September 2024 | €0.01 | 576,027 | 5,760 | 13 | (751) |
21. Share-based payments
Value Creation Plan
During the period ended 30 September 2024, the Group operated
four equity-settled share-based payment arrangements, summarised
as follows:
•
The Value Creation Plan
•
The Long Term Incentive Plan
•
The CFO Award
•
The Chair Award
The estimated weighted average fair value of awards granted in
the period was €4.91, and the weighted average exercise price of
awards granted in the period was nil. Four individuals exercised nil cost options during the financial year under the Value Creation plan. The awards outstanding as at 30 September 2024 had a weighted average exercise price of nil, and a weighted average
remaining
contractual life of 5.84 years.
No cash-settled share-based payment arrangements were operated in
the period.
In the period ended 30 September 2024, the Group recognised a
total share-based payment expense of €7.9m (2023: €1.1m),
including
employer’s social security accrual of €1.0m (2023: €0.6m).
Value Creation Plan
The Value Creation Plan (“VCP”) was adopted on 3 March 2020. The
VCP aligns the remuneration of Executive Directors with the value
generated for shareholders. The VCP was originally granted by
Pepco Group Limited, which was acquired by Pepco Group N.V. on
13 May 2021, and awards novated to Pepco Group N.V. at that time.
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Notes to the consolidated financial statements continued
21. Share-based payments continued
Nature of Conditional Award
Under the VCP, participants are granted a “Conditional Award” giving the
potential right to be granted nil-cost options based on
the absolute Total Shareholder Return (TSR) generated above a
hurdle (the Threshold TSR) at the end of each plan year (the
“Measurement Date”) over a seven-year period.
At each Measurement Date, up to 6.5% of the value created above
the hurdle may be “banked” in the form of a grant of nil-cost
options. For any Measurement Date since 18 April 2023 the maximum value of
nil-cost options which may be granted for each performance period
is €52m (based on a full 6.5% Conditional Award allocation).
The Initial Price for the VCP is based on a proxy for the average
valuation for the Group on 1 October 2022. Participants may
receive a grant of nil-cost options at the end of each year of the
performance period with a value representing a proportion of the
Company’s TSR above the Threshold TSR at the relevant Measurement Date.
The Threshold TSR or hurdle which has to be exceeded before share
awards can be earned by participants is the higher of:
•
the highest previous measurement of TSR (for any Measurement Date
on or after 18 April 2023 the reference point is not earlier than
1 October 2022); and
•
the Initial Price compounded by 10% p.a. (re-based with effect
from 1 October 2022).
If the value created at the end of a given plan year does not
exceed the Threshold TSR, no nil-cost options will be granted on
the Measurement Date following that year under the VCP.
The next Measurement Date will be in January 2025, 30 days after
publication of the 2024 full year results.
Vesting of nil-cost options
Under the VCP, nil-cost options may vest in three tranches of 50%, 50%, and 100%
(in each case, with the percentage applying to the unvested nil-cost options held).
Vesting schedule for nil-cost options granted prior to 18 April
2023
The vesting schedule provides that 50% of the cumulative number
of nil-cost options may vest following the third Measurement Date,
50% following the fourth Measurement Date, and 100% following the fifth
Measurement Date. At each vesting date, vesting of awards is
subject to:
a) a minimum Threshold TSR of 10% CAGR on the Initial Price being
maintained:
•
•
•
where the TSR has been achieved at the fourth Measurement Date,
50% of the cumulative balance of nil-cost options will vest. If
the TSR has not been achieved no nil-cost options will vest at this
point but they will not lapse; and
where the TSR has been achieved at the fifth Measurement Date,
100% of the cumulative balance of nil-cost options will vest. If
the TSR has not been achieved no nil-cost options will vest at this
point and the remaining cumulative balance will lapse;
b) shares allocated as a result of the vesting of nil-cost
options are subject to a two year post-vesting holding period from
the first
vesting date; and
•
in the event that in any year vesting as described above would
exceed the personal annual cap, any nil-cost options above the cap will be designated as deferred nil-cost options and will be
rolled forward and allowed to vest in subsequent years provided
the cap is not exceeded in those years, until the VCP is fully paid out or
after five years after the fifth Measurement Date when any
deferred nil-cost options will vest. Such deferred nil-cost options are
not subject to further underpins, performance conditions or
service conditions.
Vesting schedule for nil-cost options granted on or after 18
April 2023
The vesting schedule provides that 50% of the cumulative number
of nil-cost options may vest following the fifth Measurement Date,
50% following the sixth Measurement Date, and 100% following the
seventh Measurement Date. At each vesting date, vesting of awards
is subject to:
a) a minimum Threshold TSR of 10% CAGR on the Initial Price being
maintained:
•
where the TSR has been achieved at the fifth Measurement Date,
50% of the cumulative balance of nil-cost options will vest. If
the TSR has not been achieved no nil- cost options will vest at this
point but they will not lapse;
•
where the TSR has been achieved at the seventh Measurement Date,
100% of the cumulative balance of nil-cost options will vest.
If the TSR has not been achieved no nil-cost options will vest at
this point and the remaining cumulative balance will lapse;
b) shares allocated as a result of the vesting of nil-cost
options are subject to a two year post-vesting holding period from
the first
•
c) a personal annual cap on vesting of €20m, €14m, and €10m
respectively for Trevor Masters, Andy Bond, and any other
Executive
vesting date;
Director (including Neil Galloway):
•
in the event that in any year vesting as described above would
exceed the personal annual cap, any nil-cost options above the cap
will be designated as deferred nil-cost options and will be
rolled forward and allowed to vest in subsequent years provided
the cap is not exceeded in those years, until the VCP is fully paid out or
after two years after the seventh Measurement Date when any
deferred nil-cost options will vest. Such deferred nil-cost options are
not subject to further underpins, performance conditions or
service conditions; and
d) no nil-cost options may be exercised until 1 October 2025.
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
21. Share-based payments continued
Valuation of awards
The fair value of awards granted under the VCP was initially
calculated at €45.3m and employer social security liability of
€9.7m spread over the initial five-year period. An expense of €3.5m was
recognised during the period (2023: €1.1m). The expense recognised
consisted of a credit of nil (2023: €11.5m) in relation to the reversal of
charges relating to leavers and unallocated amounts in the
VCP.
Long Term awards
VCP replacement awards
On 30 September 2023, the board approved the grant of restricted
stock units (“RSUs”) and nil-cost options under the Pepco Group
N.V. Long Term Incentive Plan (the “LTIP”) to replace selected
existing awards granted under the VCP. These awards were granted on 22 December 2023.
The terms of this award are set out in the new LTIP rules
approved by the Board on 27 January 2022 and subsequently amended on 15 March 2024. The RSUs are subject to
an EBITDA performance condition and a service condition lasting until 30
September 2024 for 50% of the award, and 30 September 2025 for the remaining 50% of the award. The nil-cost options are subject to
four non-market based performance conditions (EBIT, EBITDA,
CO2 emissions, and ethical sourcing), and a service condition lasting
until 30 September 2026.
In addition, the shares underpinning the RSU awards granted
to an executive director are subject to a holding period running
until 30 September 2026 and the shares underpinning the nil-cost
option awards granted to executive directors are subject to a holding period
running until 22 December 2028. As these holding
periods extend beyond the service completion dates, they represent post-vesting restrictions for the purposes of IFRS 2.
Management have identified the LTIP awards granted to the holders
of VCP awards who agreed to surrender their existing awards as
replacement awards and have applied the principles of
modification accounting to this transaction. As such, the
underlying expense associated with the VCP awards is continuing to be recognised
over the original service period. An additional expense is
recognised over the vesting period of the replacement awards to reflect the
increase in fair value of the replacement awards over the fair
value of the VCP awards at the modification date.
The VCP replacement awards were valued using a Black Scholes
methodology with a discount to reflect the impact of post-vesting
holding periods, where applicable. For the purposes of
determining the increase in fair value resulting from the
modification, the VCP awards were valued as at the modification date using a Monte
Carlo methodology. During the period, an expense of €0.2m was
recognised in relation to the VCP replacement awards, which
reflected the likelihood of the non-market based performance
conditions being achieved.
Other LTIP awards
There have been grants of LTIP awards in the form of RSUs and
nil-cost options on 22 December 2023 and 11 April 2024 over a
total of 1.5m shares.
The RSUs are subject to an EBITDA performance condition and a
service condition lasting until 30 September 2024 for 50% of the
award, and 30 September 2025 for the remaining 50% of the award. The
nil-cost options are subject to four non-market based performance
conditions (EBIT, EBITDA, CO2 emissions, and ethical sourcing), and a service condition lasting
until either 30 September 2025 or 30 September 2026.
The LTIP awards were valued using a Black Scholes methodology
which resulted in a fair value equal to the share price on the
date of grant. During the period, an expense of €0.3m was recognised in
relation to the new LTIP awards, which reflected the likelihood of
the non-market based performance conditions being achieved.
CFO Award
On 12 October 2023, a one-off share-based payment award was
granted to the CFO in the form of a nil-cost option over 156,888
shares. The CFO Award is not subject to any performance conditions, but
has a service condition lasting until 1 April 2026.
The CFO Award was valued using a Black Scholes methodology which
resulted in a fair value equal to the share price on the date of
grant. During the period, a small credit was recognised to
reflect the charge for the period less the reversal of an accrual
of approximately €0.3m recognised in the prior period.
Chair Award
On 11 April 2024, a one-off share-based payment award was granted
to the Chair in the form of a nil-cost option over a total of 1.6m
shares.
The Chair Award is subject to various EBITDA performance
conditions and a service condition lasting until 30 September 2024
for 50% of the award, and 30 September 2025 for the remaining 50% of the
award.
The Chair Award was valued using a Black Scholes methodology
which resulted in a fair value equal to the share price on the
date of grant. During the period, an expense of €2.6m was recognised in
relation to the Chair Award, which reflected the likelihood of the
non-market based performance conditions being achieved.
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
22. Capital commitments
Capital commitments for which no provision has been made in the financial statements of the Group were as follows:
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Acquisition of property, plant and equipment and intangible assets | 74,944 | 77,746 |
23. Pension scheme
The Group operates a defined contribution pension scheme. The pension cost charge for the year represents contributions payable by the Group to the scheme and amounted to €34.8m (2023: €23.6m). Contributions amounting to €2.3m (30 September 2023: €1.1m) were payable to the scheme at the year end and are included in accruals.
24. Transactions with related parties
Please refer to note 8 for remuneration paid to key management. In FY24, payments totalling £63,932.10 were made to Woodcliffe Associates Limited, a company that Andy Bond has a related party interest in.
25. Discontinued operations
The Group has classified certain operations as discontinued operations in accordance with the requirements of IFRS 5. The financial performance of discontinued operations has been separately disclosed in the consolidated statement of comprehensive income. No related assets and liabilities have been classified as held for sale as the operation has been disposed of during the period.
The discontinued operations relate to the Group’s business in Austria. In February 2024, Pepco Group announced the exit out the Austrian market and the liquidation of Pepco Austria. The decision to discontinue these operations was made as part of the Group’s strategic review to focus on profitable markets. The financial results of discontinued operations have been disclosed separately to provide users of the financial statements with clarity regarding the Group’s ongoing operations and its financial performance.
The following table highlights the results of the discontinued operation:
| Year to | Year to | |
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Discontinued operations | ||
| Revenue | 26,279 | 53,221 |
| Cost of sales | (13,304) | (27,328) |
| Gross profit | 12,975 | 25,893 |
| Administrative expenses | (21,903) | (42,171) |
| Operating loss | (8,928) | (16,278) |
| Financial income | 187 | (25) |
| Financial expense | (623) | (1,178) |
| Loss before taxation for the period | (9,364) | (17,481) |
| Taxation | 7 | 5,748 |
| Loss for the period | (9,357) | (11,733) |
There were no items of other comprehensive income related to discontinued operations during the reporting period.
In addition to the results of Pepco Austria highlighted above, in FY24 there have been additional costs and impairments recognised as a result of disposing of the entity. In line with IFRS 5, these costs have also been included within the loss on discontinued operations within the income statement and are categorised as follows:
| Year to | Year to | |
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Total costs included in total loss on discontinuedoperations | ||
| Loss for the period from discontinued operations (as per above) | (9,357) | (11,733) |
| Impairment of receivables and loans payable to fellow subsidiaries | (73,106) | — |
| Gain on disposal of discontinued operation | 40,633 | — |
| Additional costs and provisions associated with the disposal | (6,700) | — |
| Loss on discontinued operations | (48,530) | (11,733) |
Notes to the consolidated financial statements continued
124
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
26. Restatement note
| Year to | Year to | |||||
| 30 September | 1 October | 30 September | 30 September | |||
| 2022 | 2022 | 2023 | 2023 | |||
| Old | Restated | Old | Restated | |||
| €000 | Adjustment | €000 | €000 | Adjustment | €000 | |
| Balance Sheet | ||||||
| Current assets | ||||||
| Inventory | 959,094 | (16,200) | 1,119,547 | 942,894 | (15,071) | 1,119,547 |
| Trade and other receivables CA | 71,418 | (1) | 71,417 | 143,522 | (390) | 143,132 |
| Current liabilities | ||||||
| Trade and other payables CL | 927,884 | — | 927,884 | 1,266,195 | 4,107 | 1,270,302 |
| Non-current liabilities | ||||||
| Trade and other payables NCL | 37,733 | — | 37,733 | 21,894 | (131) | 21,763 |
| Equity | ||||||
| Translation reserve | (70,316) | — | (70,316) | (25,784) | 2,377 | (23,407) |
| Retained earnings | 1,075,041 | (16,201) | 1,058,840 | 1,177,285 | (21,814) | 1,155,471 |
| Income Statement | ||||||
| Cost of sales | N/A | — | N/A | (3,353,740) | (2,473) | (3,356,213) |
| Gross Profit | N/A | — | N/A | 2,241,924 | (2,473) | 2,239,451 |
| Administrative expenses | N/A | — | N/A | (1,997,161) | (10) | (1,997,171) |
| Impairment in other non-financial assets | N/A | — | N/A | — | (3,130) | (3,130) |
| Earnings per share | ||||||
| Basic earnings per share | N/A | — | N/A | 17.8c | (1.0c) | 16.8c |
| Diluted earnings per share | N/A | — | N/A | 17.7c | (1.0c) | 16.7c |
The prior year balances have been restated and the impact on the
relevant financial statement line items have been highlighted above.
The restatement has been made as a result of a number of prior period
errors that have been noted during the year. The most significant
adjustment relates to the incorrect capitalisation of costs into
inventory which once corrected reduces inventory and reduces retained
earnings, as these costs were incorrectly capitalised in periods
prior to FY23. The remaining adjustments relate to releases of debit
balances present in receivables and payables which were required to
be written off.
27. Alternative Performance Measures (APMs)
Introduction
The Directors assess the performance of the Group using a variety of
performance measures; some are IFRS Accounting Standards and
some are adjusted and therefore termed ‘‘non-GAAP’’ measures or
“Alternative Performance Measures” (APMs). The rationale for using
adjusted measures is explained below. The Directors principally
discuss the Group’s results on an ‘‘underlying’’ basis. Results on an
underlying basis are presented before non-underlying items (material, exceptional, unusual and other items).
The APMs used in this Annual Report are underlying EBITDA, underlying
profit before tax, like-for-like revenue growth and net debt.
A reconciliation from these non-GAAP measures to the nearest measure
prepared in accordance with IFRS Accounting Standards is
presented below. The APMs we use may not be directly comparable with
similarly titled measures used by other companies.
Non-underlying and other items
The Directors believe that presentation of the Group’s results on an
underlying basis provides a useful alternative analysis of the Group’s
financial performance, as non-underlying and other items are
identified by virtue of their size, nature or incidence. This
presentation is consistent with the way that financial performance is measured by
management and reported to the Board and assists in providing a
relevant analysis of the trading results of the Group. In determining
whether events or transactions are treated as non-underlying and
other items, management considers quantitative as well as qualitative
factors such as the frequency or predictability of occurrence.
The following charges and credits have been included within
non-underlying and other items for the year ended 30 September 2024;
see note 4 for more details:
•
business restructuring programmes;
•
Impairment of goodwill and brand;
•
Hungary Fraud incident;
•
Impact of implementation of IFRIC interpretation on SaaS arrangements
and expensing significant ERP programme costs incurred; and
•
IFRS 2 charges in relation to Value Creation Plan award to the
management team.
125
Pepco Group
N.V.
Annual Report and Consolidated Financial Statements 2024
Notes to the consolidated financial statements continued
27. Alternative Performance Measures (APMs) continued
Like-for-like revenue growth
In the opinion of the Directors, like-for-like revenue growth is a measure which seeks to reflect the underlying performance of the Group’s stores. The measure is defined as year-on-year revenue growth for stores open beyond their trading anniversary, with stores relocated in a catchment and/or upsized included within LFL provided the enlarged store footprint is less than 50% bigger than the existing store.
| Year to | ||
| Year to | 30 September | |
| 30 September | 2023 | |
| 2024 | (Restated) | |
| Reported revenue growth | 10.2% | 16.0% |
| Like-for-like revenue growth | (3.2%) | 6.0% |
Underlying (IFRS 16) EBITDA
Underlying EBITDA (IFRS 16) is defined as reported EBITDA excluding the impact of non-underlying items. Prior year underlying EBITDA (IFRS 16) also excluded the impact of the discontinued operations.
| Year to | ||
| Year to | 30 September | |
| 30 September | 2023 | |
| 2024 | (Restated) | |
| €000 | €000 | |
| Reported EBITDA | 891,780 | 701,938 |
| Non-underlying items | 52,247 | 51,601 |
| Underlying EBITDA | 944,027 | 753,539 |
Underlying profit before-tax
Underlying profit before tax is defined as reported profit before tax excluding the impact of non-underlying items. Prior year underlying profit before tax also excludes the impact of the discontinued operations.
| Year to | ||
| Year to | 30 September | |
| 30 September | 2023 | |
| 2024 | (Restated) | |
| €000 | €000 | |
| Reported profit before tax | (554,119) | 158,845 |
| Other non-underlying items | 825,036 | 55,061 |
| Underlying profit before tax | 270,917 | 213,906 |
Free cash flow
Free cash flow is defined as cash generated by operations, deducted with tax paid, capex like items, and IFRS 16 cash flows shown by the reconciliation below:
| Year to | Year to | |
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Cash generated by operations | 906,361 | 732,085 |
| Tax Paid | (85,449) | (75,424) |
| Additions to property, plant and equipment | (204,559) | (356,664) |
| Additions to other intangible assets | (7,189) | (25,815) |
| Payment of interest on lease liabilities | (77,311) | (60,188) |
| Repayment of lease liabilities | (364,274) | (319,992) |
| Free cash flow | 167,579 | (105,998) |
Gross margin
Gross margin represents gross profit divided by revenue. The Group uses gross margin in its business operations, among other things, as a means of comparing the underlying profitability of the Group from period to period and the performance of its sourcing model. Gross margin is expressed as a percentage.
| Year to | ||
| Year to | 30 September | |
| 30 September | 2023 | |
| 2024 | (Restated) | |
| €000 | €000 | |
| Gross profit | 2,706,029 | 2,239,451 |
| Revenue | 6,166,749 | 5,595,664 |
| Gross margin % | 43.9% | 40.0% |
126
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
28. Subsequent events
There are no reportable subsequent events.
29. Ultimate parent company
The Company is a direct subsidiary undertaking of
IBEX Retail Investments (Europe) Limited
, which is registered in England. IBEX Retail Investments (Europe) Limited’s registered address is The Space (Floor 3), 120 Regent Street, London, W1B 5FE.
At the reporting date, the Company’s ultimate parent company was
IBEX Topco B.V
, an entity registered in the Netherlands.
27. Alternative Performance Measures (APMs) continued
Net debt (pre-IFRS 16)
The Group uses net debt because the Group believes this measure provides an indicator of the overall strength of its balance sheet and can be used to assess its earnings as compared to its indebtedness as defined by the Group’s financing agreements.
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Borrowings from credit institutions | 612,980 | 729,064 |
| Obligations under finance leases | 6,785 | 11,884 |
| Gross debt (excluding IFRS 16 lease liabilities) | 619,765 | 740,948 |
| Closing cash balance | (363,336) | (330,417) |
| Net debt (excluding IFRS 16 lease liabilities) | 256,429 | 410,531 |
1
IFRS 16 lease liability is excluded from the gross debt definition under the Group’s financing agreement.
Underlying EBITDA (pre-IFRS 16)
Underlying EBITDA (pre-IFRS 16) is defined as reported EBITDA excluding the impact of non-underlying items and the impact of IFRS 16. Prior year underlying EBITDA (pre-IFRS 16) also excluded the impact of the discontinued operations.
| Year to | ||
| Year to | 30 September | |
| 30 September | 2023 | |
| 2024 | (Restated) | |
| €000 | €000 | |
| Reported EBITDA | 891,780 | 701,938 |
| Non-underlying items | 52,247 | 51,601 |
| IFRS 16 adjustments | (429,516) | (351,057) |
| Underlying EBITDA (pre-IFRS 16) | 514,511 | 402,482 |
Underlying profit before-tax (pre-IFRS 16)
Underlying profit before tax (pre-IFRS 16) is defined as reported profit before tax excluding the impact of non-underlying items and the impact of IFRS 16.
| Year to | ||
| Year to | 30 September | |
| 30 September | 2023 | |
| 2024 | (Restated) | |
| €000 | €000 | |
| Reported profit before tax | (554,119) | 158,845 |
| Non-underlying items | 825,036 | 55,061 |
| IFRS 16 adjustments | (3,837) | (7,916) |
| Underlying profit before tax (pre-IFRS 16) | 267,080 | 205,990 |
Return on invested capital
This provides an annual measure of return based on the capital invested. The calculation is based on the following inputs:
NOPAT/IC, where IC (invested capital) = Property, plant and equipment + intangibles (excl. goodwill) + net working capital (current assets – current liabilities excluding IFRS 16 lease liabilities) and where NOPAT is defined as net underlying operating profit after tax.
| Year to | Year to | |
| 30 September | 30 September | |
| 2024 | 2023 | |
| ROIC | 22% | 17% |
127
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
30. Earnings per share
| Year to | Year to | |
| 30 September | 30 September | |
| 2024 | 2023 (Restated) | |
| ¢ | ¢ | |
| Basic earnings per share | ||
| Earnings per share from continuing operations | (114.9) | 18.8 |
| Earnings per share from discontinued operations | (8.4) | (2.0) |
| Earnings per share | (123,3) | 16.8 |
| Earnings per share from continuing operations adjusted for non-underlying items | 31.1 | 27.2 |
| Diluted earnings per share | ||
| Diluted earnings per share from continuing operations | (114.1) | 18.7 |
| Diluted earnings per share from discontinued operations | (8.4) | (2.0) |
| Diluted earnings per share | (122.4) | 16.7 |
| Diluted earnings per share from continuing operations adjusted for non-underlying items | 30.9 | 27.0 |
1. Given the loss after tax in FY24, the diluted EPS cannot be lower than basic EPS and therefore both at considered equal on a reported basis.
Basic earnings per share is based on the profit for the year attributable to equity holders of the Company divided by the number of shares ranking for dividend.
Diluted earnings per share is calculated by adjusting the weighted average number of shares used for the calculation of basic earnings per share as increased by the dilutive effect of potential ordinary shares. The only potentially dilutive instrument in issue is share awards under the VCP scheme. Please see note 21 for further details of this scheme.
The following table reflects the profit data used in the basic and diluted earnings per share calculations:
| Year to | Year to | |
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Profit/(loss) from continuing operations attributable to the ordinary equity holders of the Company | (661,639) | 108,364 |
| Add back non-underlying items: | 825,036 | 55,061 |
| Add back tax on non-underlying items | 15,822 | (6,792) |
| Adjusted profit attributable to the ordinary equity holders of the company | 179,218 | 156,633 |
The following table reflects the share data used in the basic and diluted earnings per share calculations:
| Year to | Year to | |
| 30 September | 30 September | |
| 2024 | 2023 (Restated) | |
| ‘000 | ‘000 | |
| Weighted average number of shares | ||
| Weighted average number of ordinary shares in issue | 576,000 | 575,167 |
| Weighted average number of shares for basic earnings per share | ||
| Weighted average of dilutive potential shares | 4,113 | 4,113 |
| Weighted average number of shares for diluted earnings per share | 580,113 | 579,280 |
Distribution of profit
No dividends were declared by Pepco Group N.V. for the 2024 reporting period. A dividend of 6.2 Euro Cents per share has been recommended by the Board subject to approval of the shareholders at the Annual General Meeting on 12 March 2025.
Approval and signatories
London (United Kingdom), 20 December 2024
Management
Andy Bond, Executive Chair
Stephan Borchert, Chief Executive Officer
Neil Galloway, Chief Financial Officer
Non-Executive Directors
Frederick Arnold, Independent Non-Executive Director
Maria Fernanda Mejia, Independent Non-Executive Director
Brendan Connolly, Independent Non-Executive Director
Sean Mahoney, Non-Executive Director
Grazyna Piotrowska-Oliwa, Independent Non-Executive Director
Neil Brown, Non-Executive Director
Paul Soldatos, Non-Executive Director
Notes to the consolidated financial statements continued
31. Other information
128
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Separate income statement
for the year ended 30 September 2024
| Period to | Period to | ||
| 30 September | 30 September | ||
| 2024 | 2023 | ||
| Note | €000 | €000 | |
| Administrative expenses | (658) | (630) | |
| Operating loss for the year | 2 | (658) | (630) |
| Financial income | 3 | 4 | 2 |
| Financial expense | 4 | (6) | (8) |
| Loss before taxation for the year | (660) | (636) | |
| Taxation | 5 | 166 | 310 |
| Loss for the year | (494) | (326) |
The above results were derived from continuing operations.
There was no other comprehensive income for the period.
The notes on pages 133 to 139 form part of these financial statements.
129
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Separate statement of financial position
at 30 September 2024
| 30 September | 30 September | ||
| 2024 | 2023 | ||
| Note | €000 | €000 | |
| Non-current assets | |||
| Investment in subsidiary companies | 6 | 709,199 | 702,304 |
| Trade and other receivables | 7 | 57 | 53 |
| 709,256 | 702,357 | ||
| Current assets | |||
| Trade and other receivables | 7 | 812 | 762 |
| Cash and cash equivalents | 13 | 13 | |
| 825 | 775 | ||
| Total assets | 710,081 | 703,132 | |
| Equity and liabilities | |||
| Capital and reserves | |||
| Share capital | 9 | 5,760 | 5,760 |
| Share premium reserve | 663,599 | 663,599 | |
| Share-based payment reserve | 39,908 | 33,013 | |
| Accumulated losses | (1,760) | (1,266) | |
| Total shareholders' equity | 707,507 | 701,106 | |
| Current liabilities | |||
| Trade and other payables | 8 | 2,574 | 2,026 |
| Total equity and liabilities | 710,081 | 703,132 |
The notes on pages 133 to 139 form part of these financial statements.
130
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Separate statement of changes in equity
for the year ended 30 September 2024
| Share-based | |||||
| Share | Share premium | payment | Accumulated | Total | |
| capital | reserve | reserve | losses | equity | |
| €000 | €000 | €000 | €000 | €000 | |
| Balance at 1 October 2022 | 5,750 | 663,599 | 35,830 | (939) | 704,240 |
| Total comprehensive income for the year | |||||
| Loss for the year | — | — | — | (326) | (326) |
| Total comprehensive income for the year | — | — | — | (326) | (326) |
| Transactions with owners, recorded directly in equity | |||||
| Equity-settled share-based payments | — | — | (2,817) | — | (2,817) |
| New shares issued | 10 | — | — | — | 10 |
| Total contributions by and distributions to owners | — | — | (2,817) | — | (2,807) |
| Balance at 30 September 2023 | 5,760 | 663,599 | 33,013 | (1,266) | 701,106 |
| Share-based | |||||
| Share | Share premium | payment | Accumulated | Total | |
| capital | reserve | reserve | losses | equity | |
| €000 | €000 | €000 | €000 | €000 | |
| Balance at 1 October 2023 | 5,760 | 663,599 | 33,013 | (1,266) | 701,106 |
| Total comprehensive income for the year | |||||
| Loss for the year | — | — | — | (494) | (494) |
| Total comprehensive income for the year | — | — | — | (494) | (494) |
| Transactions with owners, recorded directly in equity | |||||
| Equity-settled share-based payments | — | — | 6,895 | — | 6,895 |
| New shares issued | — | — | — | — | — |
| Total contributions by and distributions to owners | — | — | 6,895 | (494) | 6,401 |
| Balance at 30 September 2024 | 5,760 | 663,599 | 39,908 | (1,760) | 707,507 |
Refer to note 9 for a description of each reserve held within equity and details of movements in the period.
The notes on pages 133 to 139 form part of these financial statements.
131
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Separate statement of cash flows
for the year ended 30 September 2024
| 30 September | 30 September | ||
| 2024 | 2023 | ||
| Note | €000 | €000 | |
| Cash flows from operating activities | |||
| Cash generated by operations | 10 | 1 | 8 |
| Net cash outflow from operating activities | 1 | 8 | |
| Cash flows from investing activities | |||
| Interest received | — | 2 | |
| Net cash inflow from investing activities | — | 2 | |
| Cash flows from financing activities | |||
| Proceeds from the issue of share capital | — | 10 | |
| Net cash outflow from financing activities | — | 10 | |
| Effect of exchange rate fluctuations on cash held | (1) | (9) | |
| Cash and cash equivalents at beginning of period | 13 | 2 | |
| Net (decrease)/increase in cash and cash equivalents | — | 11 | |
| Cash and cash equivalents at end of period | 13 | 13 |
The notes on pages 133 to 139 form part of these financial statements.
132
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Notes to the separate financial statements
1. Significant accounting policies
Pepco Group N.V. is a public limited liability company incorporated in the Netherlands (registration number 81928491) and domiciled in the United Kingdom. The Company has a primary listing in on the Warsaw Stock Exchange. The registered address is 14th
Floor, Capital House, 25 Chapel Street, London, NW1 5DH, United Kingdom.
As part of a Group reorganisation undertaken prior to the IPO, the
Company acquired the entire shareholding of Pepco Group Limited
from Flow Newco Limited on 13 May 2021 (the acquisition date), in a
share for share exchange by issuing its ordinary shares. Consequently
the Company became the immediate holding company of Pepco Group
Limited.
The Group reorganisation has been accounted for as a common control
transaction whereby the cost of investment in Pepco Group Limited has been determined based on its net asset value on the
acquisition date. Please see note 6 for details of the Group
reorganisation.
These separate financial statements have been prepared in accordance
with IFRS Accounting Standards as endorsed by the EU and with
part 9 of Book 2 of the Dutch Civil Code and are presented in
addition to the consolidated financial statements of Pepco Group N.V.
Unless otherwise stated, the accounting policies applied are the same
as those in the consolidated financial statements.
1.1 Measurement convention
The financial statements have been prepared on the historical cost
basis. Historical cost is generally based on the fair value of the
consideration given in exchange for goods and services.
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date, regardless of whether that
price is directly observable or estimated using another valuation
technique. In estimating the fair value of an asset or a liability,
the Company takes into account the characteristics of the asset or
liability if market participants would take those characteristics into account
when pricing the asset or liability at the measurement date.
1.2 Going concern
The separate financial statements have been prepared on a going
concern basis.
In the 2024 reporting period, the Company’s current liabilities
exceed the current assets.
Refer to the Going Concern section of the consolidated financial
statements for a detailed going concern assessment of the Group,
including the Company.
1.3 Investments in subsidiaries
Investments in subsidiaries are carried at cost less impairment
provisions. Investments in subsidiaries are impaired to their
recoverable amount. Where a common control transaction takes place, an investment
is recognised at a value equivalent to the net assets of the
acquired entity on the acquisition date. Please see note 6 for more
details surrounding the common control acquisition made during 2021.
1.4 Shareholders’ equity
The reserves are recognised in accordance with the Dutch Civil Code.
1.5 Changes in accounting policies
Refer to note 1 of the consolidated financial statements for
disclosures regarding new accounting standards adopted by the Company
and the Group.
1.6 Accounting estimates and judgements
The preparation of these financial statements requires the exercise
of judgement, estimates and assumptions that affect the application
of policies and reported amount of assets and liabilities, income and
expenses. Estimates and judgements are continually evaluated
and are based on historical experience and various other factors,
including expectations of the future events that are believed to be
reasonable under the circumstances. Revisions to accounting estimates
are recognised in the period in which the estimate is revised
and in any future period impacted.
The Company makes estimates and assumptions concerning the future. By
definition, the resulting accounting estimates will seldom
equal the related actual results. The Directors continually evaluate
the estimates, assumptions and judgements based on available
information and experience.
Key sources of estimation uncertainty
The estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and
liabilities are discussed below.
Impairment of investments
The Company assesses whether there are any indicators of impairment
as at the reporting date for all investments in subsidiaries.
Investments are tested for impairment when there are indicators that
the carrying amounts may not be recoverable.
When value in use calculations are undertaken, the Directors must
estimate the expected future cash flows from the cash-generating
unit and choose a suitable discount rate in order to calculate the
present value of those cash flows. The Company assesses the recoverability of this investment by comparing the recoverable amount to the value of the Group as listed on the stock exchange. Refer to
note 1 of the consolidated financial
statements for detailed disclosures.
Key judgements
There are no key judgements made in preparation of these financial
statements.
1.7 Standards issued but not effective
For a list of new standards issued but not yet effective, please
refer to note 1.28 of the consolidated financial statements.
133
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Notes to the separate financial statements continued
2. Operating loss
The Company does not have any employees. Details of Directors’ remuneration can be found in note 8 of the consolidated financial statements. The Company does not receive a charge for these costs as these are borne by another Group entity.
Auditors’ remuneration is borne by another Group entity. Please refer to note 5 of the consolidated financial statements for details of total Group auditors’ remuneration.
3. Financial income
| Year to | Year to | |
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Interest income on loans to Group undertakings | 4 | 2 |
| Other financial income | — | — |
| 4 | 2 |
4. Financial expense
| Year to | Year to | |
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Foreign exchange losses | 6 | 8 |
| 6 | 8 |
5. Taxation
Analysis of tax (charge)/credit for the year recognised in the income statement
| Year to | Year to | |
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Current tax credit | ||
| Current tax on loss for theyear | 165 | 139 |
| Adjustments in respect of prior periods | 1 | 171 |
| Total current tax credit | 166 | 310 |
| Deferred tax (charge)/credit | ||
| Origination and reversal of temporary differences | — | — |
| Adjustments in respect of prior periods | — | — |
| Total deferred tax credit | — | — |
| Total tax credit for the year | 166 | 310 |
The current tax credit is recoverable via group relief.
Factors affecting the tax (charge)/credit for the year recognised in the income statement
The tax credit for the year differs from the standard rate of corporation tax in the UK of 25% (2023: 22.0%). The differences are explained below.
| Year to | Year to | |
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Loss before tax | (660) | (636) |
| Expected tax credit at the UK statutory rate of 25% (2023: 22.0%)* | 165 | 140 |
| Effects of: | ||
| Movements in unrecognised temporary differences | — | — |
| Adjustments in respect of prior periods | 1 | 171 |
| Expenses not deductible | — | (1) |
| Total tax credit for the year | 166 | 310 |
*
134
The Company is UK tax resident based on the Company being managed and controlled in the UK and as such is subject to UK corporation tax with the expected tax (charge)/credit reconciled to the UK statutory rate.
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
5. Taxation continued
Deferred tax not recognised
The Company has no temporary differences (2023: nil) and therefore no deferred tax assets have been recognised.
6. Investments in subsidiaries
| Total carrying | ||||
| Issued | Shareholding | value | ||
| Country of incorporation | share capital | % | €000 | |
| Pepco Group Limited | United Kingdom | £1,801 | 100 | 669,291 |
On 13 May 2021 the Company acquired the entire share capital of Pepco Group Limited in exchange for issuing its own shares. As a common control transaction, the deemed cost of the investment was the net asset value of Pepco Group Limited on the acquisition date of €669,291,000.
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Historical cost | 669,291 | 669,291 |
| Contributions to subsidiaries | ||
| Group share-based payments1 | 39,908 | 33,013 |
| 709,199 | 702,304 |
1
The Company’s subsidiaries recognise the amounts relating to awards to their employees as a share-based payment expense in their financial statements. As Pepco Group N.V. will settle the share awards, this is recognised as an increase in the investment in relevant subsidiaries in accordance with IFRS 2 “Share-based Payment”. For details of the share-based payments which have increased the Company’s investments, see note 21 to the consolidated financial statements.
7. Trade and other receivables
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Non-current trade and other receivables | ||
| Loans to Group undertakings | 57 | 53 |
| Current trade and other receivables | ||
| Interest due from Group undertakings | 10 | 5 |
| Amounts due from Group undertakings | 532 | 384 |
| Prepayments | 270 | 373 |
| 812 | 762 |
8. Trade and other payables
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Current trade and other payables | ||
| Amounts due to Group undertakings | 2,445 | 1,863 |
| Trade payables | 129 | 163 |
| 2,574 | 2,026 |
135
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Notes to the separate financial statements continued
9. Share capital and reserves
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Authorised share capital | ||
| 1,725,000,000 ordinary shares of €0.01 each | 17,250 | 17,250 |
| Issued share capital | ||
| 576,027,342 (2023: 576,027,342) ordinary shares of €0.01 each | 5,760 | 5,760 |
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at the meetings of the Company.
Share premium reserve
The closing share premium reserve on 30 September 2024 was €663,599,000 (2023 was €663,599,000).
Share-based payment reserve
This reserve comprises the cumulative value of shares to be issued as a result of the Group equity-settled share-based payment scheme. Upon the issue of any shares resulting from the scheme, a transfer will be made out of the share-based payment reserve to share capital and share premium as applicable. Please see note 21 of the consolidated financial statements for details about the share-based payment scheme.
10. Cash flow information
Cash utilised in operations
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Loss before tax | (660) | (636) |
| Adjusted for: | ||
| Net foreign exchange gains | — | — |
| Financial income | (4) | (2) |
| Financial expense | 6 | 8 |
| Cash generated from operations before changes in working capital | (658) | (630) |
| Changes in working capital: | ||
| Increase in trade and other receivables | (54) | (181) |
| Increase in trade and other payables | 548 | 509 |
| Impact of group relief not yet received | 165 | 310 |
| Net changes in working capital | 659 | 638 |
| Cash generated from operations | 1 | 8 |
Net debt reconciliation
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Cash and cash equivalents | 13 | 13 |
| Loans receivable from Group undertakings | 57 | 53 |
| 70 | 66 |
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
11. Transactions with related parties
The following is a summary of transactions with Group companies during the period and balances at the end of the period:
| Year to | Year to | |
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Interest income | ||
| Peu (Fin) Plc | 5 | 2 |
| Expenses recharged | ||
| Peu (Fin) Plc | — | 214 |
| Loans receivable | ||
| Peu (Fin) Plc | 57 | 53 |
| Interest accrued on loans | ||
| Peu (Fin) Plc | 10 | 5 |
| Amounts due from Group undertakings | ||
| Peu (Fin) Plc | 360 | 238 |
| Poundland Limited | 52 | 46 |
| Poundland Elgin Limited | 77 | 58 |
| Pepkor Europe Limited | 43 | 42 |
| Amounts owed to Group undertakings | ||
| Peu (Tre) Limited | (958) | (903) |
| Pepco Group Services Limited | (1,488) | (960) |
Interest is charged on the loans receivable at the gross effective interest rate of the Group’s external debt, plus an appropriate transfer pricing mark-up where appropriate. Loans are unsecured and repayable in line with the maturity of the Group’s external debt.
12. Financial risk management
The Management Board and Executive team are responsible for implementing the risk management strategy to ensure that an appropriate risk management framework is operating effectively within the Company. The Company does not speculate in the trading of derivative or other financial instruments.
Total financial assets and liabilities
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Related party loans receivable | 57 | 53 |
| Non-current financial assets | 57 | 53 |
| Related party loans receivable | 10 | 5 |
| Prepayments | 270 | 373 |
| Amounts due from Group undertakings | 532 | 384 |
| Cash and cash equivalents | 13 | 13 |
| Current financial assets | 825 | 775 |
| Amounts owed to Group undertakings | (2,445) | (1,863) |
| Trade payables | (129) | (163) |
| Current financial liabilities | (2,574) | (2,026) |
No items were classified as “at fair value through profit or loss” or “at fair value through other comprehensive income” during the 2024 and 2023 reporting period.
The carrying amount of financial assets and liabilities approximates its fair value.
The fair value calculation of the financial assets and liabilities was performed at the reporting date. Between the reporting date and the date of this report, the fair values reported may have fluctuated with changing market conditions and therefore the fair values are not necessarily indicative of the amounts the Company could realise in the normal course of business subsequent to the reporting date.
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Notes to the separate financial statements continued
12. Financial risk management continued
Foreign currency risk
The financial assets and liabilities of the Company are denominated in the functional currency except for the following British Pound denominated related party loans receivable, cash and cash equivalents and amounts owed to Group undertakings.
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Related party loans receivable | 52 | 60 |
| Cash and cash equivalents | 1 | 1 |
| Amounts owed to Group undertakings | (316) | (364) |
| Trade payables | (87) | (100) |
| (350) | (403) |
The following significant exchange rates applied during the period and were used in calculating sensitivities:
| Forecast rate | Spot rate | |
| Euro:British Pound | 1.19 | 1.16 |
Sensitivity analysis
The table below indicates the Company's sensitivity at the reporting date to the movements in the British Pound that the Company are exposed to on its financial instruments. The percentage given below represents a weighting of foreign currency rates forecasted by the major banks that the Company transacts with regularly. This analysis assumes that all other variables, in particular interest rates, remain constant. The impact on the reported numbers, using the forecast rates as opposed to the reporting date spot rates, is set out below.
| 30 September | 30 September | |
| 2024 | 2023 | |
| €000 | €000 | |
| Through profit/(loss) | ||
| British Pound strengthening by 10% against the Euro | (35) | (40) |
| British Pound weakening by 10% against the Euro | 35 | 40 |
If the foreign currencies were to weaken/strengthen against the Euro, by the same percentages as set out in the table above, it would have an equal, but opposite, effect on profit or loss.
Interest rate risk
At the reporting date the interest rate profile of the Company's financial instruments was:
| 30 September 2024 | 30 September 2023 | |||||
| Variable | Non-interest | Variable | Non-interest | |||
| bearing | Total | bearing | Total | |||
| €000 | €000 | €000 | €000 | €000 | €000 | |
| Non-current financial assets | 57 | - | 57 | 53 | — | 53 |
| Current financial assets | - | 23 | 23 | — | 18 | 18 |
| Current financial liabilities | - | - | - | — | — | — |
| 57 | 23 | 80 | 53 | 18 | 71 | |
Sensitivity analysis
The Directors do not consider the Company to be sensitive to movements in interest rates. A reasonably foreseeable movement in interest rates would not have a material effect on the profit of the Company or the carrying value of the Company’s financial instruments.
Credit risk
Potential concentration of credit risk consists principally of related party loans receivable. At 30 September 2024, the Company did not consider there to be any significant concentration of credit risk which had not been adequately provided for.
The carrying amounts of financial assets represent the maximum credit exposure.
The maximum remaining exposure to credit risk at the reporting date, without taking account of the value of any collateral obtained, was €80,000. All exposure to credit risk is within the United Kingdom.
Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting its obligations associated with financial liabilities. Liquidity risk arises because of the possibility that the entity could be required to pay its liabilities earlier than expected. The Company is not exposed to significant liquidity risk on the basis that its only financial liabilities are owed to other Group companies.
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13. Reconciliation of net profit and shareholders’ equity of the Company with the consolidated results
| 30 September 2024 | 30 September 2023 | |||
| Net profit | ||||
| Net profit | Total equity | for the period | ||
| Total equity | for the period | (Restated) | (Restated) | |
| €000 | €000 | €000 | €000 | |
| Shareholders’ equity and net profit for the period according to separate | ||||
| financial statements | 707,507 | (494) | 701,106 | (326) |
| Share of subsidiaries’ consolidated (loss)/profit for the period | (709,675) | (709,675) | 96,957 | 96,957 |
| Share of subsidiaries’ consolidated other comprehensive income for the period | 76,982 | - | (84,669) | — |
| Prior period share of subsidiaries’ consolidated total comprehensive income for | ||||
| the period and other reserve movements | 436,602 | - | 424,314 | — |
| Equity and profit after tax for the period according to consolidated financial | ||||
| statements | 511,416 | (710,169) | 1,137,708 | 96,631 |
This note has been restated for FY23 to reflect the restatements that have taken place in the consolidated financial statements. Please see note 26 in the consolidated financial statements for further details.
14. Subsequent events
There are no reportable subsequent events.
15. Principal subsidiaries
The statutory list of all subsidiaries and affiliated companies in included on pages 148 to 149.
16. Ultimate parent company
The Company is a direct subsidiary undertaking of IBEX Retail Investments (Europe) Limited , which is registered in England. IBEX Retail Investments (Europe) Limited’s registered address is The Space (Floor 3), 120 Regent Street, London, W1B 5FE.
At the reporting date, the Company’s ultimate parent company was IBEX Topco B.V. , an entity registered in the Netherlands.
17. Approval and signatories
London (United Kingdom), 20 December 2024
Management
Andy Bond, Executive Chair
Stephan Borchert, Chief Executive Officer
Neil Galloway, Chief Financial Officer
Non-Executive Directors
María Fernanda Mejía, Independent Non-Executive Director
Brendan Connolly, Independent Non-Executive Director
Fred Arnold, Independent Non-Executive Director
Grazyna Piotrowska-Oliwa, Independent Non-Executive Director
Paul Soldatos, Non-Executive Director
Neil Brown, Non-Executive Director
Sean Mahoney, Non-Executive Director
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Independent auditor’s report
To the shareholders and Board of Directors of Pepco Group N.V.
Report on the audit of the financial statements for the year ended 30 September 2024 included in the
annual report
Our opinion
We have audited the accompanying financial statements for the year ended 30 September 2024 (hereafter “financial statements”)
of Pepco Group N.V. (hereafter “Company” refers to the legal entity, and “Group” refers to the consolidated level), based in London,
United Kingdom. The Company is head of a group of entities (“components”). The financial information of this group is included in the
2024 Consolidated Financial Statements of the Group. The financial statements include the 2024 Consolidated Financial Statements
and the 2024 Separate Financial Statements.
In our opinion:
•
The accompanying Consolidated Financial statements give a true and fair view of the financial position of the Group as at
30 September 2024 and of its result and its cash flows for the year ended 30 September 2024 in accordance with International
Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code.
•
The accompanying Separate Financial statements give a true and fair view of the financial position of the Company as at
30 September 2024 and of its results for the year ended 30 September 2024 in accordance with International Financial Reporting
Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code.
The Consolidated Financial Statements comprise:
1. the consolidated statement of financial position as at 30 September 2024;
2. the following statements for the year ended 30 September 2024: the consolidated income statement, the consolidated statement of
other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows; and
3. the notes comprising a summary of the material accounting policies and other explanatory information.
The Separate Financial Statements comprise:
1. the separate statement of financial position as at 30 September 2024;
2. the following statements for the year ended 30 September 2024: the separate income statement, the separate statement of changes
in equity and the separate statement of cash flows; and
3. the notes comprising a summary of the accounting policies and other explanatory information.
Basis for our opinion
We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those
standards are further described in the 'Our responsibilities for the audit of the financial statements' section of our report.
We are independent of the Group and the Company in accordance with the EU Regulation on specific requirements regarding statutory
audit of public-interest entities, the Wet toezicht accountantsorganisaties (Wta, Audit firms supervision act), the Verordening inzake de
onafhankelijkheid van accountants bij assurance-opdrachten (ViO, Code of Ethics for Professional Accountants, a regulation with respect
to independence) and other relevant independence regulations in the Netherlands. Furthermore we have complied with the Verordening
gedrags- en beroepsregels accountants (VGBA, Dutch Code of Ethics).
We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Information in support of our opinion
We designed our audit procedures in the context of our audit of the financial statements as a whole and in forming our opinion thereon.
The following information in support of our opinion was addressed in this context, and we do not provide a separate opinion or conclusion
on these matters.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both
individually and in aggregate, to the financial statements as a whole.
Based on our professional judgement we determined the materiality for the financial statements as a whole at €15.4 million (2023: €11.7
million). The materiality is based on 7.5% of profit before tax from continuing operations when normalized for impairments. We have also
taken into account misstatements and/or possible misstatements that in our opinion are material for the users of the financial statements
for qualitative reasons.
Audits of group entities (components) were performed using materiality levels determined by the judgement of the group audit team,
based on the materiality of the Consolidated Financial Statements
We communicated with the Audit Committee that misstatements in excess of €500 Keur, which are identified during the audit, would be
reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.
Scope of the group audit
The Company is at the head of a group of entities (“components”). The financial information of this group is included in the 2024
Consolidated Financial Statements of the Group.
We tailored the scope of our audit to ensure that we performed sufficient work to be able to give an opinion on the financial statements
as a whole. We used the outputs of our risk assessment, our understanding of the Group, its environment, controls and critical process, to
consider qualitative factors in order to ensure that we obtained sufficient audit coverage across all financial statement line items.
As part of designing our audit, we assessed the risk of material misstatement in the financial statements whether due to fraud or error
and then designed and performed audit procedures responsive to those risks. In particular, we looked at where management made
subjective judgement such as making assumptions on significant accounting estimates.
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Scope of the group audit continued
Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and performing the group audit.
In this respect we have determined the nature and extent of the audit procedures to be carried out on the entities. Our group audit is
mainly focused on financially large entities in terms of size and financial interest or where significant risks or complex activities were
present, leading to full scope audits having been performed on the following two sub groups in scope, Pepco Group CEE and Poundland.
We performed audit procedures at group level on areas such as consolidation, financial statement disclosures and impairment testing for
intangible assets (including goodwill). Specialist were involved amongst others in the areas of information technology, treasury, forensic
and valuation.
We also involved component auditors from the Forvis Mazars Network and other audit firms, who are familiar with local laws and
regulations. For these component auditors, the group audit team provided detailed written instructions, which include the requirements
for component audit teams, the audit approach for significant audit areas, other information obtained centrally and the need for
awareness for fraud risks. Our oversight procedures also included a combination of remote and on-site reviews of working papers of the
auditors of the significant components in Poland and United Kingdom, (virtual) meetings with component auditors and management of
the components, and reviewing deliverables supplied by the component auditors to gain sufficient understanding of the work performed.
We varied the nature, timing and extent of these procedures based on both quantitative and qualitative considerations. For smaller
components, we have performed review procedures or specified audit procedures.
By performing the procedures mentioned above we have been able to obtain sufficient and appropriate audit evidence about the
consolidated and separate company financial information and to provide an opinion on the financial statements as a whole.
Audit approach fraud risks
We refer to section ‘Risk management’ of the Management Board Report for management’s fraud risk assessment. We note that
management regularly updates its risk assessment including fraud and updates its risk and control framework.
In accordance with Dutch Standards on Auditing, we are responsible for obtaining reasonable assurance that the financial statements
taken as a whole are free from material misstatements, whether due to fraud or error. Inherent to our responsibilities for the audit of the
financial statements, there is an unavoidable risk that material misstatements go undetected, even though the audit is planned and
performed in accordance with Dutch law. The risk of undetected material misstatements due to fraud is even higher, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Also, we are not responsible for the
prevention and detection of fraud and non-compliance with all laws and regulations. Our audit procedures differ from a forensic or legal
investigation, which often has a more in-depth character.
As part of our procedures of identifying fraud risks, we evaluated fraud risks factors with respect to financial reporting fraud,
misappropriation of assets and corruption. We identified the following fraud risks and performed the following specific procedures:
Fraud risk 1
Our audit work performed
Management override of controls
Amongst others we have performed the following audit procedures:
Management is ordinarily in a unique position to adjust the financial
•
an assessment of the internal control framework, including
statements by overriding controls that otherwise appear to be
management integrity, and evaluated the design and
operating effectively.
implementation of the relevant controls in the financial
In this context, we paid attention to:
closing process;
•
•
Inquiries of individuals with different levels of responsibility
The appropriateness of journal entries and other adjustments
involved in the financial reporting process about inappropriate or
made in the preparation of the financial statements, such as
unusual activity relating to the processing of journal entries and
consolidation journals.
other adjustments;
•
Potential biases in estimates, such as impairment of intangible
assets (goodwill and other intangible assets) and right-of-use
•
Test the appropriateness with underlying audit documentation
assets, leases and derivatives.
of a sample of journal entries and other adjustments made
during the year, at the end of the reporting period and
•
Significant transactions, if any, outside the normal course
post-closing entries;
of business.
•
an evaluation of judgements and decisions for bias by
•
The results of the Internal Audit and external specialists
management for key accounting estimates with respect to
investigations and the implementation of mitigating measures on
goodwill and other intangible assets, leases and derivatives,
the Hungary fraud matter as detailed under Cybersecurity (Fraud
including retrospective reviews of judgements and assumptions
Risk 4) below.
related to significant accounting estimates of the prior and
current year.
Fraud risk 2
Our audit work performed
Risk of fraud in revenue recognition
Amongst others we have performed the following audit procedures:
The disclosure on the accounting principles in relation to
•
We assessed the internal control framework and evaluated the
revenue recognition is set out in Note 3 of the consolidated
design and implementation of the relevant controls in the financial
financial statements.
closing process and other processes.
The risk of fraud in revenue recognition is a presumed audit risk.
•
We assessed the IT environment and relevant systems.
For the Company this has been assessed as a risk for overstatement
•
We performed audit procedures on non-standard journal entries
of revenue through the occurrence of inappropriate manual
based on fraud risk criteria.
transactions (non-standard transactions).
•
We tested the reconciliation point of sales systems to cash.
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Independent auditor’s report continued
To the shareholders and Board of Directors of Pepco Group N.V.
Audit response to the risks of fraud continued
Fraud risk 3
Our audit work performed
Risk of fraud / bribery through use of agents (sourcing)
Amongst others, we have performed the following audit procedures
The company uses agents in its sourcing process which creates a
•
We obtained an understanding of the design and implementation
potential risk of fraud / bribery through the use of agents. The
of the processes and controls in place with regards to the
majority of the products are sourced from factories in China, India
procurement cycle.
and Bangladesh which are considered to have a higher risk of
•
corruption and bribery.
We tested the operating effectiveness of the controls
implemented over the onboarding of new suppliers in the
procurement process.
•
We identified at risk suppliers based on an inspection of external
forensic reports issued in prior years and substantively tested the
identified transactions with these suppliers during the current
financial year.
•
We obtained the internal audit department reports issued during
the year and inspected these to determine whether there were
any matters that we needed to be aware of in terms of the
procurement process.
Fraud risk 4
Our audit work performed
Cybersecurity
Amongst others we have performed the following audit procedures:
In February 2023, the Company was targeted by a significant fraud
Our audit procedures included the following:
in Hungary, executed through a sophisticated social engineering
•
We reviewed the scope, methodology, and findings of the forensic
scam. This incident prompted a comprehensive review of both the
financial and IT control environments to mitigate the risk of similar
specialists engaged by the Board of Directors to ensure the
future occurrences. Despite proactive collaboration with relevant
thoroughness and accuracy of their analyses.
authorities, the recovery of the misappropriated funds is deemed
•
With the involvement of our own forensic specialists, we held
unlikely.
meetings with the external lawyers and specialists engaged by
The fraud incident had substantial implications for the Company’s
the Board of Directors to obtain explanations about the
control environment. The Board of Directors, in collaboration with
current developments.
Internal Audit, undertook additional procedures over key risks in all
•
We assessed the adequacy and effectiveness of the additional
operating entities. Some instances of non-compliance with
procedures and improvements implemented by the Board of
procedures and accounting rules were discovered, including related
Directors and internal audit.
to supplier discounts.
•
We evaluated the mitigating measures put in place to ensure
Additional internal Audit activities were performed together with
they are robust and sufficient to prevent future occurrences of
external forensic specialists to leverage industry best practice and
similar fraud.
subject matter expertise. These efforts included performing a
comprehensive analyses of balance sheet positions and
•
We obtained the results of the Internal Audit procedures on the
implementing measures to prevent future occurrences.
phishing attack and the resulting process improvements made,
and determined any additional work required.
On the basis of Internal Audit and its external specialists’
•
investigations the Company took appropriate remediation
We assessed the work performed by the component auditors on
measures.
highlighted focus areas.
In light of the significant financial impact of the unrecovered funds,
comprehensive analyses of balance sheet positions and the
subsequent changes to the control environment, this was considered
as areas of focus during our audit.
In addition, we also performed the following more general procedures:
•
we assessed the whistleblowing and compliance matters followed up by management;
•
we evaluated whether transactions, both usual and unusual, with related parties have been identified and appropriately disclosed;
and
•
we have incorporated an element of unpredictability in the selection of the nature, timing and extent of our audit procedures
Our response to the risk of non-compliance of laws and regulations
We have obtained an understanding of the relevant laws and regulations. We have identified the following laws and regulations that
have an indirect effect on the financial statements: anti-bribery and corruption laws & regulations, competition and data privacy laws,
and human rights laws and regulations.
We held enquiries with management and the audit committee if the entity is compliant with laws and regulations which directly or
indirectly have a material impact on the financial statements. We also inspected relevant correspondence with regulatory and
supervisory authorities. We also inspected lawyers’ letters and remained alert to indications of identified and suspected non-compliance
throughout the audit, held enquiries with legal counsel, and obtained a written representation from management that all known
instances of identified and suspected non-compliance with laws and regulations were disclosed to us.
Observations
The aforementioned audit procedures have been performed in the context of the audit of the financial statements. Consequently they
are not planned and performed as a specific investigation regarding fraud and non-compliance with laws and regulations, except for the
instances mentioned under Cybersecurity. Our audit procedures have not led to any findings.
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Audit approach going concern
Our responsibilities, as well as the responsibilities of the Board of Directors, related to going concern under the prevailing standards are
outlined in the “Description of responsibilities regarding the financial statements” section below. The Board of Directors has performed its
going concern assessment and has not identified any going concern risks. Our main procedures to assess the Board of Directors
assessment were:
•
we considered whether the Board of Directors assessment of the going concern risks includes all relevant information of which we are
aware as a result of our audit;
•
we evaluated the consistency of information used in the Board of Directors going concern assessment (including cash flow projections
and stress test scenarios) and information obtained through auditing other areas such as impairment assessments;
•
we analyzed the Company’s financial position as at year-end and compared it to the previous financial year in terms of indicators that
could identify going concern risks;
•
we inquired with the Board of Directors on the key assumptions and principles underlying the Board of Directors assessment of the
going concern risks;
•
we inspected agreements in terms of conditions that could lead to going concern risks.
Based on these procedures, we did not identify any reportable findings related to the Company’s ability to continue as going concern.
Our key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements. We have communicated the key audit matters to the Board of Directors. The key audit matters are not a comprehensive
reflection of all matters discussed.
These matters were addressed in the context of the audit of the financial statements as a whole and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
Key Audit Matter
How our scope addressed this matter
Impairment testing of goodwill
We involved our valuation specialists during our audit procedures.
The group accounting policies in respect of
Our audit procedures included the following:
goodwill and impairment are set out in the
•
We evaluated the design effectiveness of controls related to the impairment
accounting policy notes of the consolidated
assessment including the appropriateness of management’s assessment of the CGUs,
financial statements (Note 1.10). The disclosure
on the ‘Accounting estimates and judgements’
indicators of impairment, discount rates and forecasts.
in relation to impairment of intangible assets
•
We assessed and evaluated the reasonableness of key assumptions in the fair value
(goodwill) is set out in Note 1.29 of the
less cost of disposal and value in use calculations, including the received offer(s)
consolidated financial statements.
supporting the fair value less cost of disposal and the projected revenue growth,
For purposes of impairment testing, goodwill is
operating margin, discount rates and growth rates used in the value in use model.
allocated and monitored on a (group of) Cash
•
We benchmarked key assumptions against external data and challenged
Generating Unit (‘CGU’) level. Other intangibles
management by comparing the assumptions to historic performance of the company
and property, plant, and equipment are
and local economic developments, taking into account the sensitivity test of the
grouped to CGUs. For goodwill, management
goodwill balances for any changes in the respective assumptions;
is required to assess the recoverable amount
•
We engaged with our internal valuation experts to assist us in evaluating the
of the respective CGUs.
appropriateness of the fair value less cost of disposal and value in use impairment
In view of the inherent uncertainties, including
models, including the key assumptions and supporting documentation, and conclude
those related to the current macro-economic
on the overall reasonableness.;
environment, the projection of sales volumes,
•
revenues, margins, and discount rates in
We audited management‘s sensitivity analysis to assess the impact of potential
management's impairment tests, involved an
changes in assumptions;
increased level of judgement for CGUs. As a
•
We verified the mathematical accuracy of the models and agreed these models with
result of impairment testing for the current
relevant data;
year, management concluded on impairment
•
We evaluated the reasonableness of the disclosures made in the financial statements
loss of €771 million, relating to Poundland.
in relation to the carrying value of goodwill.
Given the high level of judgement made by
Our observations
management to estimate the recoverable
amounts used in management’s impairment Applying the aforementioned materiality, we did not identify any reportable findings in
tests for intangible assets (including goodwill) management's assessment of the recoverability of intangible assets (including goodwill)
and property, plant and equipment, the
and property, plant and equipment impairments recorded in Notes 10 and 11.
impairment testing was a key audit matter.
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Independent auditor’s report continued
To the shareholders and Board of Directors of Pepco Group N.V.
Report on the other information included in the Annual Report 2024
In addition to the financial statements and our auditor’s report thereon, the Annual Report 2024 contains other information that consist of:
•
Introduction to governance;
•
Report of the Board of Directors;
•
Corporate governance Statement;
•
Audit Committee report;
•
Remuneration report;
•
Annexures – Other information.
The annual report contains other information, in addition to the financial statements and our auditor's report thereon.
Based on the following procedures performed, we conclude that the other information:
•
is consistent with the financial statements and does not contain material misstatements; and
•
contains all the information regarding the management report and the other information as required by Part 9 of Book 2 of the Dutch
Civil Code.
We have read the other information. Based on our knowledge and understanding obtained through our audit of the financial statements
or otherwise, we have considered whether the other information contains material misstatements.
By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard
720. The scope of the procedures performed is substantially less than the scope of those performed in our audit of the financial
statements.
Management is responsible for the preparation of the other information, including the management report in accordance with Part 9 of
Book 2 of the Dutch Civil Code and other information as required by Part 9 of Book 2 of the Dutch Civil Code.
Report on other legal and regulatory requirements and ESEF
Engagement
We were engaged by the Board of Directors as statutory auditor of the Company on December 8, 2021 for the audit for the year ended
30 September 2021 and have operated as statutory auditor ever since that financial year.
No prohibited non-audit services
We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU Regulation on specific requirements regarding
statutory audit of public-interest entities.
European Single Electronic Format (ESEF)
The Company has prepared its annual report in ESEF. The requirements for this are set out in the Delegated Regulation (EU) 2019/815 with
regard to regulatory technical standards on the specification of a single electronic reporting format (hereinafter: the RTS on ESEF).
In our opinion the Annual Report prepared in XHTML format, including the partly marked-up Consolidated Financial Statements as
included in the reporting package by the Group, complies in all material respects with the RTS on ESEF.
The Board of Directors is responsible for preparing the Annual Report including the financial statements in accordance with the RTS on
ESEF, whereby management combines the various components into one single reporting package.
Our responsibility is to obtain reasonable assurance for our opinion whether the Annual Report in this reporting package complies with
the RTS on ESEF.
We performed our examination in accordance with Dutch law, including Dutch Standard 3950N 'Assurance-opdrachten inzake het
voldoen aan de criteria voor het opstellen van een digitaal verantwoordingsdocument' (assurance engagements relating to compliance
with criteria for digital reporting).
Our examination included among others:
•
obtaining an understanding of the Group’s financial reporting process, including the preparation of the reporting package;
•
identifying and assessing the risks that the Annual Report does not comply in all material respects with the RTs on ESEF and designing
and performing further assurance procedures responsive to those risks to provide a basis for our opinion, including:
•
obtaining the reporting package and performing validations to determine whether the reporting package containing the Inline XBRL
instance document and the XBRL extension taxonomy files have been prepared in accordance with the technical specifications as
included in the RTS on ESEF;
•
examining the information related to the 2024 Consolidated Financial Statements in the reporting package to determine whether all
required mark-ups have been applied and whether these are in accordance with the RTS on ESEF.
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Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Description of responsibilities regarding the financial statements
Responsibilities of the Board of Directors for the financial statements
The Board of Directors is responsible for the preparation and fair presentation of the financial statements in accordance with EU-IFRS and
with Part 9 of Book 2 of the Dutch Civil Code. Furthermore, the Board of Directors is responsible for such internal control as the Board of
Directors determine is necessary to enable the preparation of the financial statements that are free from material misstatement, whether
due to fraud or error.
As part of the preparation of the financial statements, the Board of Directors is responsible for assessing the Group’s and the Company’s
ability to continue as a going concern. Based on the financial reporting frameworks mentioned, the Board of Directors should prepare the
financial statements using the going concern basis of accounting, unless the Board of Directors either intends to liquidate the Company
or to cease operations, or has no realistic alternative but to do so.
The Board of Directors should disclose events and circumstances that may cast significant doubt on the Company's ability to continue as
a going concern in the financial statements.
The Audit Committee is responsible for overseeing the Company's financial reporting process.
Our responsibilities for the audit of the financial statements
Our objective is to plan and perform the audit engagement in a manner that allows us to obtain sufficient and appropriate audit
evidence for our opinion.
Our audit has been performed with a high, but not absolute, level of assurance, which means we may not detect all material errors and
fraud during our audit.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements. The materiality affects the
nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.
We have exercised professional judgement and have maintained professional scepticism throughout the audit, in accordance with Dutch
Standards on Auditing, ethical requirements and independence requirements. Our audit included among others:
•
identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and
performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
•
obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Company’s internal control;
•
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by the Board of Directors;
•
concluding on the appropriateness of the Board of Directors use of the going concern basis of accounting, and based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the
Group’s and the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to
draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future
events or conditions may cause a company to cease to continue as a going concern.
•
evaluating the overall presentation, structure and content of the financial statements, including the disclosures; and
•
evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves
fair presentation.
We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant findings in internal control that we identify during our audit. In this respect we also submit an
additional report to the audit committee in accordance with Article 11 of the EU Regulation on specific requirements regarding statutory
audit of public-interest entities. The information included in this additional report is consistent with our audit opinion in this
auditor's report.
We provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and
where applicable, related safeguards.
From the matters communicated with the Audit Committee, we determine the key audit matters: those matters that were of most
significance in the audit of the financial statements. We describe these matters in our auditor's report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.
Rotterdam, 20 December 2024
Forvis Mazars Accountants N.V.
O. Opzitter RA
145
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Articles of Association provisions governing the distribution of profit
The holders of ordinary shares are entitled to one vote per share and to participate in the distribution of dividends and liquidation
proceeds. Pursuant to Article 26 of the Articles of Association, a dividend may be declared provided that the Company's equity exceeds
the amount of the paid-up and called-up part of the issued capital, increased by the reserves which must be kept by virtue of the law.
The Board shall determine the amount of profits to be reserved. The general meeting is authorised to, in whole or in part, distribute the
profits remaining thereafter and to declare a distribution in kind. The Board is authorised to declare interim distributions of profits or on
account of a freely distributable reserve.
146
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
List of branches
The table below lists all branches of the Company as well as all subsidiaries whose results were consolidated during the reporting period.
Branch
Place of branch
Country of branch
Register of branch
Origin entity
Country of origin entity
Fully Sun China
Bangladesh
Bangladesh
TIN- 4404-3933-6667 Fully Sun China
China (Hong Kong)
Limited – Bangladesh
Limited
Poundland Limited – Isle of Man
Isle of Man
Tax reference no:
Poundland Limited
UK
Isle of Man
C145894-73
Poundland Limited – Republic of Ireland
Republic of Ireland Tax reference no:
Poundland Limited
UK
Republic of Ireland
9798866A
147
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Statutory list of all subsidiaries and affiliated companies
as at 30 September 2024
This list forms part of the notes to the 2024 separate financial statements and has been referenced therein.
Entity name
Country of incorporation
Registered no.
Shareholding Principal place of business
Pepco Group Limited
UK
09127609
100%
14th Floor, Capital House, 25 Chapel
Street, London, United Kingdom NW1 5DH
Peu (Fin) Plc
UK
11808114
100%
14th Floor, Capital House, 25 Chapel
Street, London, United Kingdom NW1 5DH
Peu (Tre) Limited
UK
11808312
100%
14th Floor, Capital House, 25 Chapel
Street, London, United Kingdom NW1 5DH
Pepco Group Services Limited
UK
10972213
100%
14th Floor, Capital House, 25 Chapel
Street, London, United Kingdom NW1 5DH
Dealz Retailing
Republic of Ireland
541977
100%
Unit 3 Westend Retail Park,
(Ireland) Limited
Blanchardstown, Dublin 15
Poundland International Limited
UK
03484379
100%
Poundland Csc, Midland Road, Walsall,
United Kingdom WS1 3TX
Vaucluse Diffusion S.A.S.
France
RCS 306 487 075
100%
19 Rue du Musée 13001 Marseille, France
Dealz España SL
Spain
B86867512
100%
C/Bravo Murillo 192, Madrid, Spain
Dealz Poland Sp z.o.o
Poland
KRS 0000692949
100%
Ul. Jasielska 16A, 60-476 Poznan,
Wielkopolskie
Poundland Limited
UK
02495645
100%
Poundland Csc, Midland Road, Walsall,
United Kingdom WS1 3TX
Pepkor Europe Limited
UK
09015100
100%
Poundland Csc, Midland Road, Walsall,
United Kingdom WS1 3TX
Pepkor UK Retail Limited
UK
09288913
100%
Poundland Csc, Midland Road, Walsall,
United Kingdom WS1 3TX
Viewtone Trading
UK
07398652
100%
Poundland Csc, Midland Road, Walsall,
Group Limited
United Kingdom WS1 3TX
Viewtone Limited
UK
03271182
100%
Poundland Csc, Midland Road, Walsall,
United Kingdom WS1 3TX
Frozen Value Limited
UK
01003192
100%
Poundland Csc, Midland Road, Walsall,
United Kingdom WS1 3TX
Jack Fulton Limited
UK
02317009
100%
Poundland Csc, Midland Road, Walsall,
United Kingdom WS1 3TX
Viewtone Trustees Limited
UK
04560070
100%
Poundland Csc, Midland Road, Walsall,
United Kingdom WS1 3TX
Minaldi Limited
UK
09151610
100%
Poundland Csc, Midland Road, Walsall,
United Kingdom WS1 3TX
Pepkor Import B.V.
Netherlands
KvK 61649112
100%
Noord Brabantlaan 265,
5652LD Eindhoven
Pepkor France S.A.S.
France
RCS 805 402 104
100%
1 Place Boieldieu, 75002, Paris, France
Pepco Retail España SL
Spain
B86283751
100%
Avda. Baix Llobregat 1-3, Módulo A,
Planta Baja Par No., Esc. P,
El Prat de Llobregat
Fully Sun China Limited
China (Hong Kong)
CR 1075298
100%
Rm 1006-8, 10/F, Sun House, 181
Des Voeux Road Central Sheung Wan,
Hong Kong
PGS Shanghai Co., Ltd
China
913100007914
100%
8th Floor, H Zone (East), 666 Beijing East
Road, Huangpu District, Shanghai
PGS Partner India
India
U74999HR2018
100%
Unit No-128, Suncity Success Tower
Private Limited
FTC073537
Sector, 65, Gold Course Extn Road,
Gurugram, Gurgaon HR, 122005
Pepco Holdings Sp z.o.o.
Poland
0000791461
100%
ul. Strzeszyńska 73A, 60-479 Poznań
Pepco Germany GmbH
Germany
HRB 224064
100%
c/o WeWork, Kemperplatz 1,
DE-10785, Berlin
148
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Entity name
Country of incorporation
Registered no.
Shareholding Principal place of business
Pepco Italy S.r.l
Italy
MI-2568153
100%
Via Michelangelo Buonarroti 39,
20145 Milano (MI), Italy
Pepco Properties Sp z.o.o.
Poland
KRS 0000356422
100%
ul. Strzeszyńska 73A, 60-479 Poznań
Pepco Austria GmbH*
Austria
FN 534293a
100%
Gertrude-Fröhlich-Sandner-Straße 2-4/
Turm 9/7. Stock, 1100 Wien
Pepco Poland Sp z.o.o.
Poland
KRS 0000111962
100%
ul. Strzeszyńska 73A, 60-479 Poznań
Konopacka Holdings B.V.
Netherlands
KvK 58864504
100%
Noord Brabantlaan 265, 5652LD Eindhoven
Rawksa Holdings B.V.
Netherlands
KvK 58864385
100%
Noord Brabantlaan 265, 5652LD Eindhoven
Cardina Investments Sp z.o.o.
Poland
KRS 0000424893
100%
ul. Strzeszyńska 73B lok. 4, 60-479 Poznań
Evarts Investments Sp z.o.o.
Poland
KRS 0000471011
100%
ul. Strzeszyńska 73B lok. 4, 60-479 Poznań
Pepco Ingatlan Kft
Hungary
Cg. 01-09-300734
100%
H-1138 Budapest, Váci út 187
Pepkor Europe GmbH
Switzerland
CHE-194.732.602
100%
c/o Kanzlei Pilatushof, Hirschmattstrasse
15, 6003 Luzern
Pepco Hungary Kft
Hungary
Cg. 01-09-192750
100%
H-1138 Budapest, Váci út 187
Pepco Czech Republic s.r.o.
Czechia
24294420
100%
Prague 4 – Nusle, Hvězdova 1716/2b,
PSČ 14078
Pepco Retail SRL
Romania
J40/4655/2013
100%
17 Ceasornicului street, 3rd floor, District 1,
Bucharest, Romania
Pepco Slovakia s.r.o.
Slovakia
46 868 674
100%
Nevädzova 6, Ružinov, Bratislava,
821 01, Slovakia
Pepco Croatia d.o.o.
Croatia
MBS 081038164
100%
Zagreb (Grad Zagreb), Damira
Tomljanovića Gavrana 11
Pepco Lithuania UAB
Lithuania
304488450
100%
Viršuliškių skg. 34-1, Vilniaus, 05132, Lithuania
Pepco Latvia SIA
Latvia
40203062113
100%
Strelnieku iela 9 – 7, Riga, LV-1010, Latvia
Pepco d.o.o.
Slovenia
7176457000
100%
Tržaška cesta 515, Brezovica pri Ljubljani,
1351, Slovenia
Pepco Estonia OU
Estonia
14249111
100%
Sõpruse Pst 145, Kristiine District, Tallinn,
13417, Estonia
Pepco Bulgaria EOOD
Bulgaria
205119149
100%
Nikola Tesla №5 str., fl. 4, Building BSR 2,
Sofia 1574, Bulgaria
Pepco d.o.o. Beograd-Novi
Serbia
21457345
100%
Bulevar Mihaila Pupina 10L, 11000 Novi
Beograd
Beograd, Serbia
Pepco Group
UK
14772767
100%
14th Floor Capital House, 25 Chapel
International Limited
Street, London, United Kingdom, NW1 5DH
Poundland Elgin Limited
UK
12111238
100%
Poundland Csc, Midland Road, Walsall,
United Kingdom, England, WS1 3TX
Online Poundshop Limited
UK
08870575
100%
Poundland Csc, Midland Road, Walsall,
United Kingdom, WS1 3TX
Pepco Greece IKE
Greece
162515401000
100%
Municipality of Nikaia – Agios Ioannis
Renti, at Petrou Ralli Street No 97,
PC 18233
Pepco Portugal Unipessoal LDA Portugal
3453-7748-7417
100%
Rua Hermano Neves 18, piso 3, E7,
1600-477 Lisbon (Portugal)
Pepco B-H d.o.o.
Bosnia and Herzegovina 4203144510006
100%
Sarajevo, street Skenderpašina no. 1,
Municipality Centar Sarajevo, 71 000
Sarajevo, Bosnia
Pepco Logistics S.L
Spain
773439
100%
C/Bravo Murillo 192, Madrid, Spain
Pepco Distribution Sp. z o.o.
Poland
0001042265
100%
ul. Strzeszyńska 75, 60 – 479 Poznań
*
Whilst we own 100% of this entity, it is no longer under the control of Pepco Group N.V. and is considered to be a discontinued operation in the consolidated
financial statements.
149
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Glossary of terms
Term
Definition
AGM
Annual General Meeting of shareholders
APM
Alternative Performance Measure
Annual Report
Management report (bestuursverslag) as referred to in Section 2:391 of the Dutch Civil Code
Articles
Articles of Association of the Company, as amended from time to time
BCI
Better Cotton Initiative
Board
Directors of the Company
Board Rules
Board of Directors’ Rules of Procedure
CAP
Corrective action plan
CEE
Central and Eastern Europe
CEO
Chief Executive Officer of the Company
CFO
Chief Financial Officer of the Company
CGU
Cash-generating unit
CODB
Cost of doing business
CODM
Chief Operating Decision Maker
Company/PGNV
Pepco Group N.V.
Company Secretary
Company secretary of the Company
Covid-19
The pandemic of coronavirus disease 2019 (Covid-19) caused by severe acute respiratory syndrome coronavirus
2 (SARS-CoV-2). The pandemic has led to severe global socioeconomic disruption, the closure of a number of
businesses and wide-spread shortages of supplies
DC
Distribution centre
Dutch Code
Dutch Corporate Governance Code
Dealz
FMCG-led price-anchored retailer (non-UK)
EAP
Equity Award Plan
EBITDA
Operating profit or loss before depreciation and amortisation adjusted for capital and reclassification items
EGM
Extraordinary general meeting of shareholders
EPS
Earnings per share
ERP
Enterprise resource planning
ESG
Environmental, social and governance
EU
European Union
External auditors
Forvis Mazars Accountants N.V
FMCG
Fast-moving consumer goods
Forvis Mazars
Forvis Mazars Accountants N.V., the Company’s external auditors
Fultons/Fultons Foods
Viewtone Trading Group Limited and its subsidiaries
FVOCI
Fair value through other comprehensive income
FVTPL
Fair value through profit and loss
FY19
1 October 2018 to 30 September 2019
FY20
1 October 2019 to 30 September 2020
FY21
1 October 2020 to 30 September 2021
FY22
1 October 2021 to 30 September 2022
FY23
1 October 2022 to 30 September 2023
FY24
1 October 2023 to 30 September 2024
GM
General merchandise
GOTS
Global Organic Textile Standard
150
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Term
Definition
Group/Pepco Group
The Company and its subsidiaries
IAS
International Accounting Standards
IBEX/ITBV
IBEX Topco B.V.
IFRIC
International Financial Reporting Interpretations Committee
IFRS
International Financial Reporting Standards
IPO
Initial Public Offering – on 26 May 2021 the Company was admitted for listing on the Warsaw Stock Exchange
LFL
Like for like
LTIP
Long Term Incentive Plan
NED
Non-Executive Director
NOPAT
Net underlying operating profit after tax
PBT
Profit before tax
Pepco
Apparel-led multi-price retailer
PGS
Pepco Global Sourcing
Poundland
FMCG-led price-anchored retailer (UK)
Poundland Group
Poundland companies
RCF
Revolving credit facility
Relationship Agreement
Agreement between affiliates of ITBV and the Company
ROIC
Return on invested capital
SaaS
Software-as-a-Service
Share
A share in the capital of the Company
Shareholder
Holder of one or more shares
Subsidiary
Subsidiary of the Company as referred to in Section 2:24a of the Dutch Civil Code
VCP
Value Creation Plan
WE
Western Europe
WSE
Warsaw Stock Exchange (Giełda Papierów Wartościowych w Warszawie)
Warsaw Code
Code of Best Practice for GPW Listed Companies 2021
YoY
Year on year
151
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Shareholder information
Contact details
The Board values the insight gained from shareholder
engagement and places significant importance on maintaining
General enquiries
close relationships with shareholders, taking account of and
14th Floor, Capital House
responding to their views. The Group’s Non-Executive Chair, CFO
25 Chapel Street
and investor relations team communicate on a regular basis with
London NW1 5DH
shareholders and analysts and endeavour to facilitate open
United Kingdom
engagement. In FY24, frequent investor meetings were held
0203 735 9210
alongside a focused Capital Markets Day post year end.
contact@pepcogroup.eu
The Group has an investor relations website at www.pepcogroup.
Investor relations
eu/investors where all regulatory news as well as other information
investorrelations@pepcogroup.eu
on the Pepco Group is available.
General media enquiries
We aim to maintain strong dialogue with our shareholders and
media@pepcogroup.eu
regularly collect feedback. Please contact investorrelations@
pepcogroup.eu.
Financial and corporate media enquiries
PEPCOGroup-LON@finsbury.com
The Company’s Annual General Meeting will be held prior to
31 March 2025.
152
Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024
Pepco Group N.V.'s commitment to environmental issues is
reflected in this Annual Report, which has been printed on UPM
Finesse Silk, an FSC® certified material. This document was
printed by Opal X using its environmental print technology, which
minimises the impact of printing on the environment, with 99% of
dry waste diverted from landfill. Both the printer and the paper mill
are registered to ISO 14001.
Pepco Group N.V.
14th Floor,
Capital House
25 Chapel Street London
NW1 5DH
United Kingdom
0203 735 9210
contact@pepcogroup.eu
